Ronan Lawlor, 28, from Durrow, Co Laois, last stayed in the hostel before crossing the border into Torres de Paine National Park in Chile.
The chemical engineer, who was backpacking around South America since August 8 last, had been keeping in touch with family and friends until the middle of last month.
Mr Lawlor has not been seen since entering the national park — a spectacular 1,130 sq km nature preserve shared by Chile and Argentina — on November 22.
He was due to return to Argentina to catch a flight from the southern town of Ushuaia to Buenos Aires on November 25.
Mr Lawlor’s best friend, Barney McCabe, said discovery of the rucksack on Thursday was the first physical evidence of Mr Lawlor being in a specific location and narrowed down the search area. “It is very welcome news.”
Friends and members of Mr Lawlor’s family are flying to Argentina today and will travel to El Calafate to help search efforts.
Mr Lawlor, an experienced trekker, had quit his engineering job in Ballina, Co Mayo, to go travelling for eight months before arriving in Australia where he planned to settle.
Interpol is involved in the search for the missing man and Irish embassy officials in Buenos Aires have been playing a leading role in coordinating efforts to find him.
Mr McCabe said he was shocked that Mr Lawlor had gone missing because he was such a meticulously well-organised person and was very physically fit.
His worried family have set up a website at www.ronanlawlor.org in both English and Spanish in an effort to find him.
Gráinne Lawlor, Mr Lawlor’s first cousin, said the rucksack was significant because it pin-pointed the specific area where he went missing.
“It indicates that he entered the park but did not return for his rucksack,” she said. “He is very well organised and if there has been an accident we still feel very hopeful that he is still alive.”
Meanwhile an Offaly man who was missing in Australia has been located after spending eight days wandering in the bush.
Cormac Lally, 28, turned up at his house last Wednesday morning, eight days after he told his friends he was going for a short walk. According to his brother Emmet, the details of what happened are still not known.
Cormac was medically assessed and treated in hospital in Byron Bay. He was visited yesterday by a representative of the Irish Consulate and is now planning to return home.