The ship was carrying about 100 personnel
About 40 sailors are missing after a South Korean navy ship sank near the border with North Korea, Yonhap news agency said citing military officials.
The patrol vessel, with 104 people aboard, sank after an unexplained explosion tore through its hull.
Several sailors also died, officials are quoted saying as divers prepared to return to the scene after daybreak.
South Korean officials played down earlier reports that it may have been the result of an attack by North Korea.
There was no sign of the North's military in the area where the ship sank, Yonhap said citing officials.
The military earlier said 58 sailors were rescued from near Baengnyeong island by several navy and coastguard vessels.
South Korean President Lee Myung-bak, who had convened an emergency meeting of security officials, had ordered the military to focus on rescuing the sailors, Yonhap news agency reported.
The police force was put on heightened alert in the capital, Seoul.
The Cheonan, a 1,200-tonne corvette, began sinking about 2130 local time (1230 GMT) on Friday, after an explosion, the South Korean Navy said.
A South Korean presidential spokeswoman said it was premature to say what caused the Cheonan to sink.
There were reports that another South Korean ship had fired shots toward an unidentified ship in the North following the alleged torpedo attack.
One report, quoting the joint chiefs of staff, said the target turned out to be a flock of birds.
2009: One North Korean sailor killed in a naval battle
2002: Four South Korean sailors and an estimated 30 North Koreans killed in a naval battle
1999: At least 17 North Korean sailors believed killed in naval fire fight
1998: South Korea captures a North Korean mini-submarine in its waters
1996: A North Korean submarine runs aground in South Korean waters
The apparent clash comes at a time of tension between the two Koreas. International talks aimed at ending the communist nation's nuclear ambitions have been stalled for months.
Economic ties between the neighbours have also faltered, with continuing rows over both cross-border tourism and a joint economic zone at Kaesong.
The disputed sea boundary itself has seen numerous incidents, most recently in January and February.
In January, North Korea fired artillery into the sea near the disputed maritime border, as part of a "military drill". South Korea returned fire, but no injuries were reported.
The following month, North Korea declared four areas near the sea border to be naval firing zones, according to the South Korean military, and deployed multiple rocket launchers close to the frontier.
Deadly naval clashes happened in 1999 and in 2002 and the latest in November 2009 when a fire-fight left a North Korean patrol boat in flames and one person dead.
The South Korean vessel alleged that the North Korean vessel had crossed the disputed sea border - a charge North Korea denied.
South Korea recognises the Northern Limit Line, drawn unilaterally by the US-led United Nations Command to demarcate the sea border at the end of the 1950-53 Korean War. The line has never been accepted by North Korea.