Update 11:14 p.m. EDT: A massive rescue operation involving 50 ships and helicopters is under way at the site of the sinking ferry, BBC reported. The ferry was carrying 476 people, most of them school children on their way from Incheon to the resort island of Jeju, the report said.
South Korean President Park Geun-hye has ordered the coast guard to search the ship so no one is left behind, the report said, citing local news agency Yonhap.
Update 11:10 p.m. EDT: One person has been found dead in the ferry, a coast guard official said Wednesday.
There was a loud impact and noise before the ferry started sinking, a passenger who had been rescued from the vessel told YTN news television.
Update 10:20 p.m. EDT: All 338 students, teachers on board the sinking ferry have been rescued, Reuters reports.
The ferry, identified as the Sewol, was carrying about 470 passengers, including the students and teachers, en route to Jeju island, about 100 km (60 miles) south of the Korean peninsula.
Update 9:50 p.m. EDT: Reuters reports that South Korea's YTN television said 100 passengers had already been rescued.
The ferry, which also carries cars and trucks, has a capacity of about 900 people.
A passenger on board told YTN a rescue helicopter had reached the vessel. The unidentified passenger, who sounded calm, said those on board were in their cabins but were having trouble keeping their balance.
The reason for the ship's difficulties was not immediately clear. Heavy fog had set in overnight in the area, leading to cancellations of many passenger ferry services to islands.
However, news reports said visibility in the area was fair.
South Korea's coast guard has received a distress signal from a passenger ship with about 350 people on board off the southwest coast, an official told Reuters Wednesday, with Korean media reporting the vessel was sinking.
Korean television news reports also said many of the passengers on board were students on the way to Jeju island on school trips. Those reports could not be confirmed immediately by the coast guard.
South Korea's Yonhap news agency said the ferry had sent out a distress signal about 20km (12 miles) off the island of Byungpoong.
A rescue operation has been launched, Yonhap said.