Police seized $230m of cocaine and freed eight hostages in a dramatic rescue operation off the Canary Islands in Spain.

The operation, dubbed 'Neptune,' was launched in November and had been kept secret until investigations were completed to unravel a criminal network, authorities said.

The Police General Directorate said in a statement that a Serbian crew member had turned on his fellow suspected drug smugglers, shooting one of them and throwing the body overboard before holding the others hostage.

The hostage taking was discovered by Spanish police who were intercepting around 2.3 tonnes of cocaine being transported from Latin America to a vessel called the 'Sea Paradise' near the Canary Islands.

An hours-long negotiation ensued, during which the Serbian hostage taker surrendered and freed the crew.

All on board were detained on suspicion of drug trafficking, with the cocaine shipment confiscated from a hidden compartment.