The 20-meter vessel has been completely destroyed by the fire.
The yacht is in the waters close to Porto Venere, not far from the holiday hotspot of La Spezia.
Witnesses several kilometres away have reported seeing a column of thick black smoke rising from what remains of the vessel, Euronews reports.
Footage taken from on board a passing tourist boat shows the sky around the stricken yacht is hazy with fumes from the fire.
All of the crew managed to get to safety aboard a tender.
Fire crews, the owner of the ship and a tugboat are working to extinguish the flames.
The cause of the fire is not yet known.
The fire broke out just a few kilometres from the scenic port town La Spezia.