Navy and police vessels battled heavy seas to save the 60-year-old man and a 48-year-old woman from the 19-metre vessel about 7.25am on Tuesday.
Mechanical failures - including a broken rudder - led to the yacht becoming stranded about 185km east of Nowra, on the NSW south coast, before it drifted further to sit around 300km offshore.
The Australian Maritime Safety Authority received a distress beacon alert about midday on Monday, but heavy seas and strong winds plagued rescue efforts.
The 60-year-old - who owns the boat - is believed to have been living on the yacht since the start of the year.
He and his companion set sail from Jervis Bay in recent days.
Dramatic footage of the rescue showed a small police recovery vessel next to the yacht as the two boats rose and fell in heaving seas.
"Got one, one aboard," an observer can be heard shouting in the video.
The duo, who are due to return to Sydney at 6.30pm on Tuesday, were uninjured but exhausted after their near-24-hour ordeal, quickly falling asleep after climbing aboard their rescue vessel.
NSW Police Chief Inspector Anthony Brazzill labelled the pair "extremely lucky", given winds of between 50 and 70km/h and seas of up to 6m had made executing the rescue effort challenging.
"Their boat wasn't sinking, but they were definitely taking on water. They've got mechanical issues in terrible conditions … it could have been life-threatening if we weren't able to get to them in time," he said.
"They tell us they did check the weather conditions (before leaving shore), but we've had gale-force warnings, so whether it was the right move or not, not for me (to say)."
Their yacht, the Spirit of Mateship, had to be abandoned.
The Spirit of Mateship has competed in Sydney to Hobart races with wounded veterans as crew. (Quentin Jones/AAP PHOTOS)
Navy vessel HMAS Canberra assisted in the rescue effort alongside the police vessel Nemesis.
HMAS Canberra captain Brendan O'Hara said conditions for the pair on the yacht would have been torturous, given his much larger ship had also battled the powerful swells.
"(The pair) were just holding on as best they could … I hate to think what it was like for them because even on board Canberra, which is quite a large ship, we were rocking and rolling a fair bit," he said.
"Not much of the crew here have had much sleep, so the two personnel in Spirit of Mateship definitely had no sleep at all.
"I dread to think about the conditions in there."
HMAS Canberra rendezvoused with the stricken yacht at 1am on Tuesday, while the police boat arrived at 3am.
The choppy conditions initially prevented authorities from winching the duo out of their boat and airlifting them for treatment.
They will be given a medical assessment when they arrive in Sydney.
Before the rescue, AMSA officials said the matter had become "time-sensitive" with the boat taking on water.
Two Royal Australian Navy ships and an RAAF C-130J Hercules aircraft were initially involved in the rescue operation.
The Spirit of Mateship has entered a number of Sydney to Hobart races, crewed by wounded and injured former defence force personnel to raise money for charity Mates4Mates.
Former prime minister Tony Abbott launched the boat in 2013 before the vessel's first Sydney to Hobart effort.
7°C