Lt Cmdr Matthew Kroll of the US Coast Guard said the bodies were found close to the wreckage of the Conception, which caught fire in the early hours while 33 passengers were asleep below deck.
He said the bodies showed injuries consistent with drowning.
At least eight people are confirmed to have died. A further 25 are still unaccounted for.
The 75ft diving boat caught fire off the north coast of Santa Cruz Island. Rescuers reached the scene at 3.28am local time.
Five crew members who were on deck at the time were rescued by a passing boat, the Grape Escape.
It was initially thought there were 34 people trapped on board but that number was later corrected to 33.
Lt Cmdr Kroll told CNN that “there could still be people out there so we’re still searching” but said that the more time passed the less chance there was of finding people alive.
He said: “We don’t know if it was an explosion or a fire that slowly grew. Everything happened quickly enough that people could not get off the ship.”
The search was being carried out by boats and helicopters, with dive teams arriving on the scene shortly, he said.
Part of the mayday call made by the captain of the Conception has been released, in which the dispatcher can be heard asking: “Can you get back onboard and unlock the boat?”
He can also be heard asking: “You don’t have any firefighting gear at all? No fire extinguishers or anything?”
The captain’s answers are indistinct in the recording.
The Conception is thought to have been on a three-day diving trip which had been due to finish on Monday afternoon.
The US Coast Guard said it had dispatched ”multiple rescue assets along with assets from local agencies” in an effort to save the people on board, arriving at the scene 14 minutes after being alerted.
At a press conference, Captain Monica Rochester, US Coast Guard Los Angeles Long Beach sector commander, said that shoreline searches were continuing.
There are hopes that some of the passengers may have been able to get off the boat and been able to swim to shore. The boat is believed to have been anchored not far off Santa Cruz Island overnight.
The vessel sank in about 54ft of water about 60ft from shore although a portion of its bow was still above water.
Earlier Coast Guard senior chief Aaron Bemis told CNN that rescue efforts were being hampered because the fire kept reflashing.
#CoastInc: @VCFD responded to boat fire off the north side of Santa Cruz Island at approximately 3:28am. @USCG helping support rescue operations for people aboard a dive boat. #ChannelIslands @USCGLosAngeles @CountyVentura @SBCOUNTYFIRE pic.twitter.com/DwoPGfBjtA
— VCFD PIO (@VCFD_PIO)
He said: “It keeps being extinguished and re-flashing, possibly due to the amount of fuel on board. Unsure why, but it’s consistently being put out and reflashing.”
Mr Bemis was unable to confirm whether there had been any survivors among the 33 people trapped below deck, adding: “The fire was so intense that even after it was put out, we’re not able to actually embark the vessel and, you know, look for survivors at this point. It’s still ongoing.”
The actor Rob Lowe said he had been on board the Conception many times, tweeting: “My heart breaks for those onboard the Conception. An unspeakable horror on a boat I’ve been on many times. My prayers and thoughts are with the families.”