Craig Laidley helped save the German man at Balian Beach on the Indonesian island's west coast on Wednesday afternoon before being swept away by the current.
Indonesian search and rescue organisation Basarnas confirmed the 56-year-old's body was found on Friday morning, about a kilometre west of where he was last seen, ABC News said.
Mr Laidley's family said they were shocked and devastated by his death and that he left behind two sons and an extended family who would miss him dearly.
"It is no surprise to us that he put his life on the line to help another in need," the family said in a statement on Friday.
"His bravery and determination are a testament to his character.
"A man who brought kindness, strength, light and laughter to those around him."
The family thanked those who helped during the tragedy.
"The police for their quick response, the search and rescue teams for their around-the-clock tenacity and the countless locals and tourists who have pitched in their time, efforts and care to help," the family said.
"We hope Craig's heroic spirit inspires others to act with courage, selflessness and offer a helping hand to those in need."
Relative Mark Laidley had previously asked for help finding his cousin on social media.
"Our Uncle/Brother and Son (Craig) was last seen helping a male that was reportedly drowning in the ocean between Tebing Balian rocks near Balian Beach at 4pm 16th of October," the Facebook post said.
"He was then seen drifting back out to the ocean after saving this man's life."
The post said local fishermen were helping with the search.
"We hope he is found safe," Mark Laidley said.
Kate Ferguson also posted a plea asking the public to help find Mr Laidley.
"Craig rescued Micro Stalla (29) but was then swept out by the powerful current," she wrote on Facebook.
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