The fire broke out just before 3 p.m. on the boat, which had 10 passengers onboard, according to New Jersey State Police.
A photo from the scene showed black smoke billowing from a small boat in flames.
The people onboard quickly escaped by jumping into the water. Once the fire was put out, the boat sank, officials said.
There were no injuries, state police said.
It was not clear late Sunday what caused the fire.