Twenty Chinese tourists and two of the vessel's three crew members were rescued and sent to a hospital in Kota Kinabalu after the boat sank off Malaysia's Sabah state on Borneo island, according to Malaysian officials.
The third crew member has not yet been found, bringing the total number of missing to six.
The sinking of the catamaran today, the first day of the Lunar New Year holiday, sparked a major air and sea search covering some 400 nautical square miles.
The boat left yesterday morning from the Sabah state capital Kota Kinabalu en route for Pulau Mengalum, an island known for its pristine beaches and dive sites.
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The boat owner reported it missing on Saturday evening.
The skipper and a crew member were found alive earlier Sunday off a nearby island, before the discovery of the other survivors.
"According to the skipper, the boat was 'broken' after being hit by waves and sank," Ahmad Puzi Kahar, head of the MMEA, said in a statement.
Malaysian navy chief Ahmad Kamarulzaman Ahmad Badaruddin said naval ships and a C130 aircraft were used in the search.
Roughs seas and strong winds hampered rescue efforts on Saturday night and Sunday, authorities said.
Prime Minister Najib Razak said he was closely monitoring developments.
Chinese President Xi Jinping "demanded all-out search and rescue efforts" by Malaysia, his country's official Xinhua news agency reported.
It added that an emergency team, led by an official from Beijing's national tourism administration, had been set up to handle the incident.
"Yesterday was the first day of the Chinese Lunar New Year and it should have been a happy day. Unfortunately, such a bad thing happened," China's consul-general in Sabah, Chen Peijie, was quoted as saying by Malaysia state news agency Bernama.
An earlier disaster involving Chinese visitors to Malaysia -- the unexplained disappearance of a Malaysia Airlines plane in March 2014 while en route from Kuala Lumpur to Beijing -- soured relations between the two nations.