The ferry, which was travelling to Batam island, south of Singapore, was 26 kilometres (16 miles) north of Jakarta when the blaze broke out at 3:35 am (2035 GMT Monday), ministry spokesman Bambang Ervan said.

The fire was extinguished about 90 minutes later, he added.

"All 225 passengers on board the Selvia were rescued," Ervan told AFP, adding the government has launched an investigation into the cause of the fire.

A passenger who was travelling with her young son told local television she was asleep when an explosion occurred.

"I was woken up by a loud explosion at about 3:00 am and I heard people saying that the engine has blown up," Kurnia said.

"I saw thick smoke and rushed to find a life jacket. I then felt that the the ship started to tilt to the left."

The incident came after nearly 30 people were killed earlier this month when a ferry with more than 400 people on board caught fire.

The Indonesian archipelago of more than 17,000 islands is heavily dependent on ferry services but the industry has a poor safety record and fatal accidents are common.

Up to 335 people were killed when a heavily overloaded ferry sank off the island of Sulawesi in January 2009.