Just after 8 o'clock this morning HM Coastguard received reports the Red Falcon Ferry had collided with at least two yachts whilst trying to dock in Cowes Harbour during heavy fog.
There were also unconfirmed reports of cries for help from the area.
RNLI crews from Cowes and Calshot have joined Coastguard rescue teams from Bembridge, Needles and Ventnor in an extensive search.
A Coastguard search and rescue helicopter was also involved but due to the weather it had to turn back.
The ferry, with 56 people onboard, remains grounded at the entrance at Cowes. All are said to be safe and well.
Cowes Harbour is currently closed to all traffic.
At 11:21am The Coastguard updated the situation off East Cowes;
Any witnesses who saw the collision, the grounding and/or any passengers onboard the Red Falcon are asked to contact MCA Investigations and Enforcement Unit via email at firstname.lastname@example.org leaving their contact details.