A spokesman said,a number of casualties had been reported. Huge waves are said to have caused the boat to overturn.
Reports say local boats have already rescued some passengers on board the vessel near the island of Polillo.
Rescue boats and helicopters sent to the area have been hampered by bad weather, officials say.
A local emergency services official, Juanito Diaz, said initial reports suggested the ferry, which has not been named, “sustained a big hole that caused it to capsize”.
“The rescuers are still scouring the water in search of other possible passengers,” he said, the Philippines Inquirer reports.
The coastguard said the ferry had capacity for 280 people and had not been overloaded.
Boat accidents are relatively common in the Philippines, which frequently experiences storms.
Tropical Storm Tembin is forecast to hit land early on Friday and people travelling home for Christmas had been warned to do so earlier than usual.>