He was spotted last night in a life raft in the Coral Sea off Queensland state, an Australian Maritime Safety Authority spokesman said. The raft had been dropped by a French patrol aircraft.
Fossett's control team, at Washington University in St Louis, Missouri, had lost contact with him about eight hours earlier after he sailed into a thunderstorm east of Australia. It then started picking up signals from his rescue beacon.
Fossett was in the 10th day of his attempt to be the first to fly around the world non-stop in a balloon.
At the weekend, the Chicago financier broke his own record for distance travelled in a balloon when he reached the halfway point in his circumnavigation attempt.
As Fossett flew over the small beach town of Geraldton, Australia, he was seen poking his head over the gondola to view the last continent he will cross before heading across the Pacific Ocean.
Fossett then told mission control it was going well. "I was very worried over the Indian Ocean, that I would be caught and captured by the high- pressure area and never be able to get out of it," he said.
His ground crew burst into applause on learning he had travelled 10,480 linear miles, breaking his own record of 10,360 miles set in January 1997. It was his fourth attempt to circumnavigate the world.
A balloon has no way to propel itself or steer, and moves by climbing or descending into winds going in the desired direction. That makes the meteorologists on the crew vital to the flight's success.
Fossett has communicated with his crew by e-mail, using a computer that transmits to a satellite, getting immediate reports on how to avoid winds that could blow him off course.
Fossett was aiming to land anywhere east of Mendoza, Argentina, from where he had lifted off on 7 August.
The record for the longest-lasting balloon flight, of nine days, 17 hours and 55 minutes, was set in January by a Swiss pilot, Bertrand Piccard. He was forced to abandon his round-the-world attempt when China refused to let him cross its airspace.
Fossett had said that if he was finally successful in his attempt, he would donate half the $1m prize to Washington University.Reuse content