The container cargo ship Sinaran Andaman, registered in Phnom Penh, struck rocks off Koh Hei and began taking on water, Marine Police told The Phuket News.
As compartments in the 65-metre-long ship began flooding, the vessel suffered engine failure.
The 10 crew have abandoned ship and boarded a lifeboat.
Efforts by Marine Police patrol boat Tor 814 to reach the lifeboat were unsuccessful as it tossed dangerously close to rocks.
Two Cambodian crewmen have since been airlifted to safety by a Royal Thai Navy helicopter
The ship, owned by Malaysian company Andaman Unik Sdn Bhd, was last in port at Tub Lamu, Phang Nga, and was rounding Phuket when it struck the rocks.
The crew fired flares for help, alerting other vessels that the ship was in distress.
More to follow.