A life preserver locator system for assisting in locating and rescuing persons located in body of water. The life preserver locator system includes a water permeable envelope attachable to a life preserving aid and having a deployable water-activated signal assembly. In one embodiment, the deployable water-activated signal assembly includes a water-activated gas inflator mechanism that on exposure to water, such as saltwater, automatically actuates to inflate a balloon. The balloon deploys from the envelope into the air on a cable attached to the life preserver locator system allowing establishment of a line of sight from a person in the water and a rescue vessel to the balloon. In one embodiment, a light emitting device, such as strobe light, on the balloon automatically activates to emit light, to assist the person in the water in locating the life preserving aid. When the person reaches the life preserving aid, the person can activate a switch on the water-activated signal assembly changing the appearance of the emitted light.