It happened at the channel entrance around 8:37 a.m.
Investigators said a good Samaritan rescued the boaters from the 25-foot vessel. Meanwhile, the Coast Guard worked to extinguish the fire. Photos showed large plumes of smoke above the boat.
The fire was put out, Station Galveston remained on the scene to assess possible pollution.
"The quick actions and teamwork of the Daniel Tarr crew and good Samaritans resulted in a safe outcome for the passengers involved," said Chief Warrant Officer Brooke Milstead, command duty officer. "We encourage all mariners to remain vigilant and provide assistance when safely possible."
No injuries were reported.
It’s still unclear what caused the fire.