Rescuers have recovered 10 bodies and rescued 126 people after a passenger ferry caught fire and sank in waters off Indonesia's Sulawesi province on Friday, the Xinhua news agency quoted a government official as saying on Saturday.

KM Fungka Permata, which departed from Baubau town of Southeast Sulawesi province and was heading to Bangai port in Central Sulawesi province, sank in the waters off Sagu Island in central Indonesia, spokesperson of the Transport Ministry Bambang Ervan said.

"The ship caught fire and finally went down in waters off Sagu Island," he told Xinhua.

All the survivors of the ship were ferried to Bangai port Saturday morning, said the spokesperson.

The search and rescue operation for possible missing people was underway, said R Agus H Purnomo, director general for sea transport of the Transport Ministry.

"Combing of areas where the incident took place is being carried out," he added.

Ship ferrying is a favourite transport means in Indonesia, a vast archipelago country home to over 17,500 islands.

- Bernama