The boat, the Nazila 05, was carrying 27 passengers and crew members when it departed Taliabu Island in North Maluku province just after dusk on Sunday.
It was bound for Kema, a coastal village in the same province, said Muhammad Rizal, who heads the search and rescue office in Central Sulawesi's Palu city, near where the boat sank.
He said the incident was first reported to authorities on Monday morning by the ship's owner, Rifani Samatia, after the Nazila 05's captain contacted him to report that the vessel's bow had broken after it was hit by high waves during rough weather.
About 30 minutes later, the captain reported that the vessel had sunk.
"All 27 people aboard managed to evacuate using a longboat before the ship went down," Rizal said, "However, their current location remains unknown".
A search-and-rescue team was dispatched using a rescue vessel, supported by navigational equipment and communication tools, a helicopter and assisted by local fishers, Rizal said.
He said the Nazila 05 was frequently used to transport tourists and was also known locally as a fishing or small passenger vessel.
Indonesia is an archipelago with more than 17,000 islands, where boats are a common form of transportation.
With lax safety standards and problems with overcrowding, accidents occur frequently.
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