Two people have been rescued after a boat caught fire and sank in the waters of Port Phillip, south of Melbourne’s city centre.

Firefighters responded to the blaze on a 30-foot cabin cruiser near Elwood beach about noon on Wednesday after residents reported seeing huge flames and plumes of black smoke.

Police and the coastguard were also called to the scene.

The fire engulfed the boat and despite the efforts of fire crews, the vessel sunk.

Two people wearing life jackets were rescued from the water and it’s unclear if they sustained any injuries.

One witness named Dan described seeing the boat engulfed in flames.

“There’s a boat on fire, there’s black fumes of smoke,” he told Melbourne radio 3AW.

“I can see huge flames coming out of it, it’s too far away to see any people but it’s a massive boat fire.

“You can see it from all aspects of the bay.”

– AAP