The balloon, carrying six tourists and a pilot, was declared missing on Sunday morning (local time).
Authorities believed it had fallen into the sea about 200 kilometres south of Lima in rough weather, but said the chance of survivors was high because the basket could float.
Local media quoted interior minister Wilfredo Pedraza as saying five women were found alive, floating in the sea with the remains of the balloon.
"Thank God, we have located five female occupants and we are continuing to search for the two missing men, whom we hope to find alive," Mr Pedraza said.
"There is joy, but also still tension because we need to find the other two young people."
Mr Pedraza sharply criticised balloon owner Globos Peru SAC, accusing it of "grave negligence" for not requiring the passengers to wear life vests on the flight over the Pacific.
He also lashed out at Globos for failing to outfit the balloon with a GPS system so that it could be tracked.
Mr Pedraza said Peruvian navy units were continuing to search the area for the two people who were still missing, including the pilot.
At least one of the male passengers tried to swim to shore, so the search area has widened.
The women were being treated in hospital.