The line has been updating disappointed passengers on its Twitter and Facebook accounts.
In a statement the line said: "Pacific Jewel is currently returning to Sydney at reduced speed due to a fault in a section of her propulsion system. Engineers have been able to examine the problem more closely and believe repairs will take longer than expected."
Passengers are being offered a full refund, a credit on a future booking and out-of-pocket travel expenses.
Those who are currently onboard Pacific Jewel -- which will now arrive back in Sydney on Wednesday -- are also being offered a cruise credit due to the disruption to their travel plans.
Cruise Critic member Sharri34 said: "Not going to complain about an extra $50 per person + an extra day on the cruise + an extra day away from work."
Pacific Jewel's next cruise is due to depart Sydney on 30 October -- it is a six-night cruise to Melbourne to coincide with the Melbourne Cup racing.