A passenger on board the ship from Surat Thani province noticed smoke and heard a cracking sound as they were about to arrive at Koh Tao.
Ninety-seven of the 108 passengers on board were unharmed, according to a Facebook post by officials.
The public relations department of the province announced that all people were rescued and there were no casualties.
Huge plumes of black smoke could be seen rising from the ferry in the footage, along with other boats attempting to save the families and cars inside, some of which had little children on board.
As heavy black smoke billowed across the ship and it caught fire, people could be seen running out of the cabin and donning life jackets.
