A rescue operation was launched at an Auburn work site about 8.45am on Thursday following reports three men had been injured.
Three men, all aged in their twenties, were initially all conscious and talking when they were trapped about 8.45am on Thursday.
NSW Ambulance superintendent Paul Turner said the deceased man had been trapped by his legs, describing the area as "a very hard scene", adding the rescue became more hard because the deceased workers colleagues had jumped into the vat to try and save him.
Some of the rescuers were experts in working in confined spaces, he said.
More than two hours later, the two other men had been rescued, but the third man died at the scene.
"My understanding is that they were cleaning a Value-Added Tax used for ink; they were in there doing maintenance cleaning and they've become trapped in the Value-Added Tax ..."
"The last person deteriorated on the scene ... multiple ambulance resources [were] inside with the man trying to save his life", Superintendent Turner said.
Paramedics, NSW Fire & Rescue and Police Rescue are on the scene.
'We did absolutely everything we could.
"It is understood that the rescue will be a complex operation and may take four or more hours", the spokesman said in the earlier statement.
Detectives have established a crime scene and are investigating.
One man has since been freed at the site on Chisolm Road, Auburn, and is being transported to Westmead Hospital.