The women, both aged in their 40s, went for a stroll on Thornton Beach Sunday evening in the far north of Queensland state before making a fateful decision to go for a dip in an area known to be infested with crocodiles.
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"The woman was swimming with a female friend, also in her 40s, at 10.30pm when the incident occurred," police said in statement.
Senior Constable Russell Parker added that the women, believed to be Australian tourists visiting the area, were in the water when one of them was grabbed, with her friend desperately trying to drag her to safety.
"They decided to take a swim in the ocean just in waist-deep water and at that point, we believe that a crocodile has taken one of the women, taken hold of her," he told the Australian Broadcasting Corporation.
"Her friend tried valiantly to drag her to the shore but unfortunately wasn't able to do so and the woman subsequently disappeared.
"Now her friend raised the alarm with a nearby business and they subsequently contacted the police."
A rescue helicopter was sent up with thermal imaging equipment but was unable to find her.
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Parker added that the surviving woman was "very, very shaken and shocked" but appeared to have escaped with only grazes.
Crocodiles are common in Australia's tropical north and they kill an average of two people each year.
Earlier this month, a desperate fisherman threw spanners and spark plugs to fight off circling crocodiles after his friend drowned when one of the animals capsized their small boat near Darwin.
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Crocodile numbers have increased since the introduction of protection laws in 1971, with estimates putting the Northern Territory's population in the wild at about 100,000.
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