The nine Australians - seven men and two women - died when a Navy Sea King chopper attached to the HMAS Kanimbla went down on Nias Island, off the west coast of Sumatra, at about 7.30pm (AEST).
Among the dead were five naval personnel, three from the Air Force and one member of the Army.
Kanimbla's captain, Commander George McGuire, said two male personnel survived the crash and were undergoing surgery on board the Kanimbla after sustaining serious injuries.
"They are in a serious condition with leg fractures and other injuries," Cmdr McGuire said.
The chopper crashed while approaching Amandraya village on the remote west coast of Nias, he said.
The helicopter and HMAS Kanimbla had been part of Australia's relief effort to rebuild the region after the devastation caused by a huge earthquake on March 28.
The quake, measuring 8.7 on the Richter scale, came just three months after the area was ravaged by the Boxing Day tsunami.
In a statement, the Defence Department said the helicopter crashed near Gunung Sitoli while conducting a sortie in support of the second phase of Operation Sumatra Assist.
Earlier, there had been hope among the Kanimbla's 300 crew that more people may have survived the crash.
Crew waited anxiously for more than an hour while the ship's second recovery helicopter was launched after Indonesian military authorities in the area suggested nine passengers on board the chopper may have survived.
Cmdr McGuire made frequent announcements over the loudspeaker for the crew to remain strong as the second evacuation team travelled to the crash site.
But an hour later the ship's crew members were informed that all nine had been killed, their bodies found in the wreckage by a team of paramedics and rescue personnel.
The shattered personnel of the Kanimbla were tonight mourning the deaths of their crewmates.
Upon hearing the news in the ship's main canteen, groups of sailors hugged and wept while others simply slumped with their heads on the table.
The rescue mission was the second of the day and both helicopters had earlier returned from Peruk Dalam, on the south of the island, where they had airlifted four Indonesians to the ship for emergency care.
There were light clouds in the area at the time but the skies were otherwise clear.
The Kanimbla has a fully equipped operating theatre with two doctors and two anaesthetists who had been operating through the afternoon.
All four were tonight fighting to save the life of their critically injured crewmates.
The Kanimbla, from which the doomed Sea King helicopter took off, had been on its way home after helping the tsunami relief effort when the ship was redirected to Indonesia to assist people displaced by Monday's earthquake.
One of the ship's officers, Lieutenant Commander Mal Ralston, said Indonesian authorities had sealed off the crash site and a full crash investigation would be conducted.
RAAF officers sent from Australia would take part in the investigation, he said.
Australian Defence Force chief General Peter Cosgrove had phoned the ship's captain tonight for a briefing.
Lt-Cmdr Ralston said the ship's chaplain was expected to conduct a service with grief-stricken crew tomorrow.
Meantime, Kanimbla was expected to reach the crash site at about midnight tonight (0300 AEST Sunday) but it was yet to be decided whether Australian landing craft would carry investigators into the area during darkness.
Lt-Cmdr Ralston said the crashed chopper had conducted a reconnaissance of the area earlier in the day and Indonesian military forces had prepared a suitable landing site.
"We cannot land anywhere without TNI (the Indonesian military) being there," he said.
Ship's captain Commander George McGuire said the prognosis for the recovery of the two injured crewmen was "good".
Cmdr McGuire was expected to make a statement to journalists on board the ship tomorrow morning.
The Governor of North Sumatra, Rizal Nurdin, expressed his sympathy to Australia over the tragedy.