The ferry was carrying 459 people, of whom 164 were rescued, coastguard officials said. Two people were confirmed dead after the ferry listed heavily onto its side and capsized in apparently calm conditions off South Korea’s southwest coast.
The Ministry of Security and Public Administration had earlier reported that 368 people had been rescued and that about 100 were missing.
But it later described those figures as a miscalculation, turning what had first appeared to be a largely successful rescue operation into potentially a major disaster.
The cause of the disaster was not immediately clear although some survivors reported that the ship appeared to have been involved in some sort of impact.
“It was fine then the ship went ‘boom’ and there was a noise of cargo falling,” said Cha Eun-ok, who said she was on deck of the ferry taking photographs when the disaster began.
“The on-board announcement told people to stay put…people who stayed are trapped,” she said in Jindo, the nearest town from the scene of the accident.
There was confusion about the total number of passengers on board, as authorities revised the figure down from 477 saying some had been double counted, amid growing frustration and anger among families of the passengers.
Many of the passengers were children and their teachers from a high school in Seoul on a field trip to Jeju island, about 60 miles (100 km) south of the Korean peninsula.
As well the passengers, there were 150 vehicles on board the ferry Sewol, officials said. Witnesses said many people were likely still inside the vessel.
An official from the Danwon High School in Ansan, a Seoul suburb, had earlier said all of its 338 students and teachers had been rescued but that could not be confirmed by the coastguard or other officials involved in the rescue.
The school official asked not to be identified.
The ferry began to list badly about 12 miles (20 km) off the southwest coast as it headed for Jeju.
A member of the crew of a government ship involved in the rescue, who said he had spoken to members of the sunken ferry’s crew, said the area was free of reefs or rocks and the cause was likely some sort of malfunction on the vessel.
There were reports of the ferry having veered off its course but coordinates of the site of the accident provided by port authorities indicated it was not far off the regular shipping lane.
Several survivors spoke of hearing a “loud impact” before the ship started listing and rolling on its side.
Within a couple of hours, the Sewol lying on its port side. Soon after, the ship had completely turned over, with only the forward part of its white and blue hull showing above the water.
Coastguard vessels and fishing boats scrambled to the rescue with television footage showing rescuers pulling passengers in life vests out of the water as their boats bobbed beside the ferry’s hull.
Other passengers were winched to safety by helicopters.
The ferry left from the port of Incheon, about 20 miles (30 km) west of Seoul, late on Tuesday.
It sent a distress signal early on Wednesday, the coastguard said, triggering a rescue that involved almost 100 coastguard and navy vessels and fishing boats, as well as 18 helicopters.
A US navy ship was at the scene to help, the US Seventh Fleet said, adding it was ready to offer more assistance.
The area of the accident was clear of fog, unlike further north up the coast which had been shrouded in heavy fog that led to the cancellation of many ferry services.
The coastguard said one person had been found dead inside the sinking ferry. An official from the Mokpo Hankook hospital on the mainland said another person had died soon after arriving at its emergency ward. That person was later identified as one of the students on the school trip.
Television and still pictures showed the stricken ferry surrounded by debris, rescue ships, and inflatable lifeboats.
The ship has a capacity of about 900 people, an overall length of 480 feet (146 meters) and it weighs 6,586 gross tonnes. Shipping records show it was built in Japan in 1994.