At a press conference they said that formal identification of the body will take place at a later date and that the death is currently being treated as unexplained.
The body was found partially submerged in the reservoir in Waterworks Valley close to where Mr Lynch went missing.
Police were called to the scene at Handois Reservoir at around 10.40 am on Thursday by a member of the public.
Members of the public are being asked to avoid the area.
Mr Lynch, a 20-year-old former Les Quennevais student, vanished after a work Christmas party in December.
Handois Reservoir was searched by police and experts using sonar equipment in the immediate days after his disappearance.
Read the full details of the press conference in Friday's JEP.