Canadian authorities boarded a ship carrying 490 Tamil migrants off the country's Pacific coast, news reports said.
Vic Towes, Minister for public safety, was quoted by the Vancouver Sun newspaper as saying that among the migrants were human traffickers and terror suspects.
"Human-smugglers and human-traffickers are now watching Canada's response to judge whether or not they can continue to take advantage of us," Towes said. "We will send a message loud and clear to other criminals: 'If you do this, then you will be prosecuted to the fullest extent of the law'."
Authorities boarded the MV Sun Sea on Thursday off British Colombia when it entered the Canadian waters. The ship, which left from Thailand in May, is to be escorted to an army base in Victoria, to be handed to immigration authorities later.
No immediate information was available on the health of the would-be refugees. According to unconfirmed reports, at least one person on board died, and many were suffering from tuberculosis.
The migrants are believed to have fled Sri Lanka following the end of the civil war between the government and Tamil separatists after the killing of rebel Tamil leader Velupillai Prabhakaran.