Russell Harris, 37, was being watched by his wife as he explored the waters off Groote Eylandt in the Gulf of Carpentaria, 400 miles from Darwin, when the reptile struck. It is the latest in a series of attacks in the Northern Territory where the saltwater crocodile population has soared in recent years after a ban on hunting was imposed.
Mr Harris's mutilated body was recovered on Sunday at the mouth of Eight-Mile Creek, a mile from where he was last seen, after police mounted an air and sea search. His injuries were consistent with a crocodile attack, police said.
The alarm was raised by Mr Harris's diving partner on Saturday afternoon when his friend failed to return to shore. The man's American-born wife had been watching with the other man's wife on Picnic Beach, just 100 metres from where Mr Harris was last seen.
Sergeant Stephen Pfitzner, of the Northern Territory Police, said: "Police advise the community that the crocodile may still be in the area and to take extra precautions if venturing into the waters off Groote Eylandt." He said the authorities were hunting the crocodile, but the reptiles were relatively common in the area. He said they hoped to relocate the killer crocodile away from human habitation.
Mr Harris, from Eastwood, near Nottingham, was working on the island - which belongs to the Anindilyakwa Aboriginal people - as a technical services superintendent for Gemco, part of the Anglo-Australian mining group BHP Billiton.
About 440 people are employed at the mine, 200 of them foreign contractors. It accounts for 10 per cent of the world's manganese production. Picnic Beach is a popular relaxation spot for workers. Measuring 30 miles by 40 miles, the low-lying territory is composed principally of mangrove forest, and visitors require a permit from the Aboriginal authorities to go there.
Mr Harris's sister has flown to Darwin, where a post-mortem examination was due to take place yesterday. His mother collapsed after being told of her son's death and is being treated in hospital in Nottingham.
A spokeswoman for BHP Billiton said counsellors had been brought in to console family and colleagues. "Our priority is to offer support to the family and also our employees," she said.
Last month, a man, aged 60, fishing from a canoe in north-eastern Australia was dragged underwater and killed by a crocodile.
The Northern Territory government, which issues permits for 600 crocodiles to be killed each year, has been lobbying the federal government for months to allow trophy hunting.
Mick Pitman, a crocodiile hunter, said it was time to lift the ban.
"The attacks are not just happening now and then, they are happening all the time," he said. "They are eating people, eating dogs, cows and horses. We are sick of it up north."