The woman, 32, a seven-year-old boy and a five-year-old girl, were seen in distress in Floyd Bay, in the Georges River at Lansvale, at about 10.15am on Saturday.
The trio had been at a park and were seen on a pier before they were spotted in the water but investigators are yet to determine how they got there.
NSW Police Acting Superintendent Luke Scott said one possibility could be the children fell into the water and the mother went in after them.
State Emergency Service volunteers helped with the search in Floyd Bay. (Dean Lewins/AAP PHOTOS)
However, he said it was still early in the investigation and police were exploring a number of lines of inquiry.
"The circumstances of how they came off the pier and into water, that is what we're looking into," he told reporters in Fairfield.
Act Supt Scott said the trio were alone at the time and he was not aware of any other family members turning up at the waterway after their deaths.
Witnesses to the incident unsuccessfully tried to save them before emergency services arrived.
The mother's body was found a short time later and the children were found at about 2pm following a major search involving police, SES and marine authorities.
Police and marine authorities were also involved in the search. (Dean Lewins/AAP PHOTOS)
"It's beyond words how tragic it would be for people that observed what happened and to the family," Act Supt Scott said.
He said the water current was very strong while rain, wind and other environmental factors had impacted the search.
The woman and children are yet to be formally identified.
A crime scene was established and anyone with information about what happened was urged to contact investigators.
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