A boat carrying Sri Lankan asylum seekers has arrived within the Cocos Islands, according to locals, who say the vessel approached on Monday morning in bad weather.

It's the first asylum seeker boat reported to have arrived within Australian territory in nearly two years.

The thinly populated chain of islands and coral atolls located mid-way between the mainland and Sri Lanka is a territory of Australia.

Local Awie Rasa told Hack he saw the 10-11m wooden boat coming through the passage of the entrance to the main lagoon between the two largest islands about 10:45am.

"It's moving pretty fast, moving 12-15 knots," he told Hack.

"It's heading towards Home Island."

Rasa was taking a ferry from Home Island, which is the most populous, to the capital on West Island.

"When we got to West Island jetty I can see police are preparing for their job. The customs on the jetty are running up and down and getting their tenders into the water."

"I heard it didn't reach Home Island, just anchorage around about 500m away from Home Island.

"That's pretty close."

He said he had worked as a skipper escorting asylum seeker vessels until last year and he believed "the yellow and light blue" boat was Sri Lankan.

"They’ve got the same colour boat - they're all coloured the same."

He believes there were 12 people on board.

Another local man told Hack he saw the boat from shore when it was "well and truly inside the lagoon".

He said the Australian Federal Police then escorted the boat to a mooring and two high-speed Border Force launches "appeared at great speed over the horizon".

He said the suspected Sri Lankan asylum seekers were then taken to a Border Force vessel.

"We've had a significant presence [of] Navy and Customs guys for many months. They come, they go, they disappear for a few days and come back," he said.

"As far as vessels reaching the lagoon and getting inside the lagoon – that's certainly the closest one that's got in for some time."

A Border Force spokesperson said the Department would not comment on operational matters.

The last asylum seeker boat reported to arrive in Australia was a vessel of 157 people intercepted on 27 June 2014 near Christmas Island.

The people from that vessel spent a month on a Customs ship before being transferred to the Curtin Detention Centre and then Nauru in mid-2014.

(Radio Australia)