The 700-tonne ferry left Pare-pare on the island of Sulawesi and was heading for Samarinda, on the Indonesia half of Borneo, but got into difficulties and sank 50 km off western Sulawesi at about 0400 local time on Sunday morning (2000 GMT).
Fishermen rescued 18 passengers and crew who were found drifting in three life rafts, according to Taufik Bulu, the head of maritime safety at Pare-pare port, who said he was citing a survivor's report.
"There's a tropical cyclone now which caused tides of five or six metres," Jusman Syafi'i Djmal, Indonesia's transport minister, said.
About 150 people have been taken off the boat, but it is not known whether they are alive or dead, he added.
Ferries are the principle form of transportation in Indonesia, an archipelago of more than 17,000 islands with a population of 235 million people.
However overcrowding and poor safety standards mean accidents are common.
In October 2007 at least 30 people died when the Acita III capsized off Baubau, another 50 died in a fire on board the Levina I in February 2007 and in December 2006 around 400 people drowned when another ferry, the Senopati Nusantara, sank in the Java Sea.