The ship, on a patrolling mission with 104 crew members on board, began sinking off the coast of South Korean-controlled Baengnyeong Island close to North Korea around 9:45pm local time, Rear Admiral Lee Ki-sik of the Joint Chiefs of Staff said.
Lee said an unexplained hole in the bottom of the ship caused the vessel to take in water.

South Korea's Yonhap news agency reported that the ship was damaged by an explosion, and said the military had not ruled out the possibility of an attack by North Korea.

A rescue mission was under way. Officials told Yonhap there were some deaths among the sailors but did not specify the number. The military, meanwhile, moved to strengthen its vigilance near the maritime border, the site of three bloody naval clashes between the warring Koreas. The divided peninsula remains in a state of war because the three-year Korean conflict ended in a truce, not a peace treaty, in 1953.

Earlier yesterday, North Korea's military had threatened "unpredictable strikes," including a nuclear attack, in anger over a report that South Korea and the US were preparing for possible instability in the totalitarian country.

After the ship began sinking, President Lee Myung-bak convened an emergency meeting of security-related ministers, including the defence minister and other top military officials. After three hours, they agreed to meet again today without making any statement about the cause of the incident, a presidential spokesman said.

Lee ordered the military to focus on the rescue, he said.

Six naval ships and two coast guard vessels rushed to save the crew, Yonhap said. Rescue helicopters and ambulances also sped to the scene, military officials said.

As well as the reported deaths among the sailors, the cable network YTN said some 40 crew members were missing.

Military officials, however, said they could not confirm deaths, and said 58 sailors had been rescued, with two being airlifted for emergency medical treatment.

Yonhap reported earlier that a South Korean ship fired shots toward an unidentified target in the direction of North Korea, raising fears of an exchange of gunfire.

The military official confirmed that South Korean troops fired shots but said the object detected by radar may have been a flock of birds.

Senior government officials told South Korean media the ship may not have been the target of an attack, but could have struck a rock or been impaired by an explosive on board.

Baeknyeong Island, four hours by boat from the port of Incheon, is the westernmost point of South Korea and is a key military post for South Korea because of its proximity to the North.