Several witnesses on shore called 911 just before 12:30 p.m. reporting dark smoke coming from a 48-foot boat off Possession Point State Park, according to Island County Fire officials.
The two adults and the dog were able to get onto a dingy and escape the flames. A Good Samaritan picked them up, according to the Coast Guard.
Firefighters were able to get to the boat and get the flames under control, but it was still burning as of mid Thursday afternoon.
Coast Guard officials said they don't know of any fuel leak at the moment but say it's possible the boat will sink.
There is no word yet what started the fire.