The survivors included the vessel's 53-year-old skipper and his 42-year-old nephew, according to La Voz de Galicia newspaper. The two men contacted their families by phone, the paper reported.
The signal from the vessel's onboard data recorder, used to track vessels, stopped transmitting around 0600 GMT, a government official in Galicia, Maica Larriba, told Spanish public broadcaster RTVE.
A rescue centre in Halifax, Nova Scotia, operated by Canada's Air Force and Coastguard, dispatched helicopters, aeroplanes and a rescue vessel to the area, 450km off Newfoundland.
Lieutenant Commander Brian Owens, a spokesman for the rescue centre, said high winds, heavy seas and fog were hampering the search, centred on the debris field from the sunken vessel.
Owens said three Cormorant helicopters were rotating in and out of the search area, while a provincial airlines aircraft and a C-130 Hercules were doing sensor sweeps. The Canadian Coastguard vessel Cygnus was still on route to the debris site, where "a number″ of Spanish fishing ships were also assisting, he said.
A Spanish fishing boat working not far from the sinking was the first to arrive and found three survivors and four bodies in one of the fishing boat's four lifeboats, officials said. Two of the emergency boats were empty and the fourth was reportedly unaccounted for.
Spain's maritime rescue centre in the Spanish capital of Madrid received the first alert from the beacon on the Villa de Pitanxo and coordinated the early response with the Halifax rescue centre, a spokeswoman with the service said.
The boat's owner, Grupo Nores, didn't immediately reply to calls or written questions. According to its website, the group operates fishing fleets in waters off Argentina, Canada, Morocco, Guinea-Bissau, Senegal as well as in the North Sea.
The news was a tragic blow to the port town of Marin in northwestern Galicia, where many make their living from the sea. Marin mayor Maria Ramallo said the sinking of the boat was the biggest tragedy on record for the community.
"We can't remember anything worse than this," Ramallo told Spain's state news agency, EFE.