Videos shared by the Philippine Coast Guard showed flames rising from the rear of the MV Esperanza Star, with billows of black smoke.
The coast guard told CNN all 120 passengers and crew were removed safely from the ship. It said the fire had been extinguished and no injuries were suffered.
The ship was traveling between the Philippine islands of Siquijor and Bohol when the fire broke out, according to the coast guard.
In a statement on Facebook, the coast guard said its rescue ships would remain in the waters of Panglao, Bohol, to monitor the situation.