Authorities were trying to confirm the total number of passengers who had been on board the ferry, but said at least 128 people were missing.
Authorities have deployed rescue vessels to the scene but bad weather has halted the operation for the night.
Relatives cry while waiting for news on missing family members who were on a ferry that sank yesterday in Lake Toba, at Tigaras Port, Simalungun, North Sumatra, Indonesia on Tuesday.
"Many people have reported their relatives missing", a local rescue official named as Budiawan told Reuters news agency.
The ferry had capacity for 60 passengers but was overloaded and also carrying dozens of motorcycles, said Sri Hardianto, an transport ministry official.
Kapal Motor Sinar Bangun boat carrying about around 80 people, majority domestic visitors, capsized at 17:30 p.m. Jakarta time after leaving Simanindo port in Samosir district, spokesman of the national disaster management agency Sutopo Purwo Nugroho said.
A mobile phone video released by the agency showed people throwing life preservers and life jackets to several people in the water from another ferry.
"I was desperate. I was scared to death".
The 1,145-square kilometre lake, formed out of an ancient super volcano, is a popular sightseeing destination. "I'm afraid my family is dead", Juwita Sumbayak, a survivor said, The Age reported.
Maritime accidents are common in Indonesia, a 17,000 island archipelago nation where many depend on ferries and other boats to get around, despite lax safety standards.
Last week a longboat carrying around 43 people sank off Makassar on Sulawesi island, leaving 13 dead, and a speedboat carrying 30 passengers sank off South Sumatra, killing at least two.