United States challenger American Magic dramatically capsized in a sudden squall while leading Italy's Luna Rossa on the third day of racing in the America's Cup challenger series.

American Magic was chasing its first win in the Prada Cup after three straight losses and rounded the last mark ahead of Luna Rossa.

But a savage gust of wind in a rain squall ahead of impending thunderstorms on Sunday struck the American yacht which soared into the air, then crashed onto its side.

None of the crew was injured and all were recovered safely.

The New York Yacht Club-backed team tweeted "awful end to what was looking like a great race for Patriot. We have confirmed that all crew are safe."

A new race immediately began to save Patriot from sinking, one in which rival teams offered their assistance. Inflatable bags were attached to keep the yacht on the surface and it was eventually lifted upright, off its side, to allow sails to be lowered and removed.

Efforts to save the high-tech yacht were touch and go at first. In race mode, the boat weighs around 6.5 tons but its 75-foot long hull was flooded with water and it seems likely its computer and other systems were severely damaged.

It wasn't immediately clear what damage the US yacht might have suffered but American Magic has four days to make repairs before racing resumes on Friday.

Strong but shifting winds on Sunday produced the most dramatic racing of the series but nothing more dramatic than Patriot's capsize which forced American Magic to retire from the second race of the day.

Earlier Britain's INEOS Team UK came from behind to beat Luna Rossa by 18 seconds for its fourth win in as many races.

Team UK leads the three-team series with four wins from four races, Luna Rossa and American Magic has yet to post a win.