The Teratai Prima ferry, carrying 250 passengers and 17 crew members, sank in rough waters off the coast of Majena in West Sulawesi on Sunday morning. Most passengers were still asleep when the accident occurred.
Only two bodies have so far been recovered. The ship's captain was among the survivors, local media reported.
A search operation, involving naval vessels, military personnel, police, and Red Cross officials, is continuing.
In late December 2006, around 500 people died when a ship sank in a storm off central Indonesia.