Everyone on board the ship was found safely, said Muhammad Rizal, who heads the search and rescue office in Palu city.
Officials earlier reported that 27 people were missing, but survivors reported that six people listed on the manifest had cancelled their plans to join the trip.
Rescuers found the survivors, who were mostly fishing crew, on a raft about 50km from the place where the boat sank in the northern waters of Taliabu Island.
The boat, Nazila 05, departed from a port on Taliabu island in North Maluku province just after dusk Sunday bound for Kema in North Sulawesi province, Rizal said.
He said the Nazila 05 was frequently used to transport tourists and was also known locally as a fishing or small passenger vessel.
The owner of the Nazila 05 told authorities the boat's captain had reported the vessel sank after its bow was broken by high waves during rough weather, and all crew managed to board a longboat before the ship went down, Rizal said.
Relatives reported the victims had tied themselves to a raft, and the National Search and Rescue Agency, or Basarnas, said a rescue vessel was heading towards the estimated location just after dawn on Tuesday where the raft was believed to be drifting in choppy waters.
"All survivors located by rescuers will be taken to a nearby city of Gorontalo," Rizal said in a video statement.
The search operation involved two rescue vessels and was assisted by local fishermen, the Basarnas said.
Indonesia is an archipelago with more than 17,000 islands, and boats are a common form of transportation.
With lax safety standards and problems with overcrowding, accidents occur frequently.
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