About 2,000 pieces dating back more than 1,000 years were spotted on the seabed by members of a diving club, the Israeli Antiquities Authority said.
At first the group thought the coins were toys, but quickly realised the significance of their discovery.
The Antiquities Authority said the find was "so valuable that it's priceless".
Divers were exploring an ancient harbour in Caesarea when they came across the gold. They collected several coins and quickly returned to the shore to inform the director of the club.
Experts from the authority called to the site uncovered "almost 2,000 gold coins in different denominations" circulated by the Fatimid Caliphate, which ruled much of the Middle East and North Africa from 909 to 1171.
Kobi Sharvit, director of the marine archaeology unit at the Israel Antiquities Authority, said excavations would be carried out in the hope of shedding more light on the origin of the treasure.
He added: "There is probably a shipwreck there of an official treasury boat which was on its way to the central government in Egypt with taxes that had been collected.
"Perhaps the treasure of coins was meant to pay the salaries of the Fatimid military garrison which was stationed in Caesarea and protected the city."
He said another theory was that the treasure belonged to a large merchant ship that traded with the coastal cities and the port on the Mediterranean Sea.
The haul, which weighs 9kg (20lb), is believed to have been exposed as a result of winter storms.
It is now the property of the state and there was no finders' fee.

Fergus Ewing said it meant 16,521 farmers had now received their Common Agricultural Policy payments.
The government has been facing pressure to deal with "failures" in the subsidies payment system.
It emerged on Friday that any fine may be waived and an extension to the deadline no longer required if a 90% target was met.
Mr Ewing said: "As of close of business last night, and subject to final confirmation, we have made BPS, Greener and Young Farmer payments to 16,521 farmers and crofters, valued at Â£343m. This represents around 90.4% of expected total payments for those schemes.
"We are awaiting a final determination from the European Commission regarding an extension to the payment deadline to 15 October, if necessary, on the grounds of the acutely challenging delivery and implementation issues we face in Scotland.
"Our payments made to date, along with the national loan scheme mean that the majority of farmers and crofters have received their money."
He added: "Over the coming weeks we will be working hard to ensure that we complete the remaining payments due to farmers and crofters as quickly as possible."
The government has accelerated payments in recent weeks amid political pressure from opposition parties, and First Minister Nicola Sturgeon has apologised to farmers for "failures" with the system.
An extension was granted in 2016, after problems arose with a new Â£178m IT system for delivering the payments.
Audit Scotland has estimated that fines for missing the deadlines could run to Â£60m, and have warned there are still "significant costs and risks for the Scottish government" over the IT problems.
The latest deadline pressure has sparked a political row at Holyrood, with Scottish Conservative leader Ruth Davidson accusing Mr Ewing and Ms Sturgeon of "not being straight" with MSPs and farmers.
The first minister said "rapid daily progress" was being made in getting payments through, and insisted she and her ministers had been clear with parliament. Mr Ewing described criticism as "fanciful".
Scuba divers have inadvertently discovered the largest trove of gold coins ever found off Israel's Mediterranean coast.
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Scotland's rural affairs secretary has said 90.4% of EU farm payments were made before the midnight deadline.