Rescue workers toiled in fading light to evacuate survivors from the isolated crash site, with US officials saying five crew members had been flown to Royal Darwin Hospital in a "serious condition".

The US Marine Rotational Force in Darwin said there were "a total of 23 personnel on board" at the time of the crash and Australia's military said only Americans were involved.

Rescue efforts were complicated by the location of the crash -- the remote and sparsely populated Melville Island about 60 kilometres (37 miles) north of the nearest city, Darwin.

The Osprey -- a mix between a helicopter and a plane -- was taking part in the Predators Run exercises, a series of warfighting drills involving thousands of soldiers from the US and Australia, as well as other militaries such as Indonesia and the Philippines.

Australian Prime Minister Anthony Albanese and Defence Minister Richard Marles extended their "deepest condolences" to the US military.

"This incident is a reminder of the significance of the service undertaken by our personnel and those of our partner nations," they said in a joint statement.

Albanese earlier described the crash as "tragic" and "regrettable" but stressed that authorities were still trying to piece together what had happened.

"We want to make sure that any information that is provided is absolutely accurate," he told reporters.

"This is a difficult incident, we are responding fully, and our priority is on providing every assistance possible."

Local authorities said Royal Darwin Hospital had activated its highest emergency alert as intensive care staff braced for the influx of injured crew.

Northern Australia has become an important staging ground for the US military in recent years, as Washington and Canberra work together to counter China's growing clout in the Asia-Pacific region.

- Troubled aircraft -

Investigators will now begin piecing together what led to the crash on Melville Island, known for coral reefs, pristine beaches, and the vibrant culture of its Indigenous-Australian inhabitants.

The Osprey aircraft has a troubled history, blighted by a string of fatal crashes over the years.

Four US Marines were killed in Norway last year when their V-22B Osprey aircraft went down during NATO training exercises.

Three Marines were killed in 2017 when an Osprey crashed after clipping the back of a transport ship while trying to land at sea off Australia's north coast.

And 19 Marines died in 2000 when their Osprey crashed during drills in Arizona.

The US Army earlier this year temporarily grounded all pilots who were not involved in critical missions, forcing them to complete further training after a series of safety incidents.

Ospreys are rapidly quick tilt-rotor aircraft that combine the features of both helicopters and turboprop planes, according to the US Air Force.

The hybrid aircraft has two swivelling engines positioned on fixed wingtips that allow it to land and take off vertically, but also travel much faster than a conventional helicopter.

Sunday's incident follows a fatal training crash last month, in which four Australians died when their Taipan helicopter plunged into the sea during a series of multinational war games in Queensland.

The Taipan had been taking part in the large-scale Talisman Sabre exercise, which brought together 30,000 military personnel from Australia, the United States and several other nations.

It crashed near the Whitsunday Islands while taking part in a nighttime operation.