A firefighting vessel tries to extinguish a fire on the car ferry Lisco Gloria in the Baltic Sea. (Axel Heimken/dapd/Associated Press)

A 200-metre ferry was ablaze in the Baltic Sea on Saturday after an explosion on the upper deck, and firefighting ships were spraying the vessel with water to keep it from breaking apart and spilling about 154 tonnes of fuel, officials said.

There were 249 people aboard who were rescued by six ships that moved in to help after the explosion on the Lisco Gloria around midnight. Three were taken to hospitals by helicopter and another 26 were slightly injured, police said.

German officials and the ferry operator said the blast was not the result of a terror attack, but appeared to have been a technical mishap.

"A terrorist attack can be excluded," said Wolfgang Harlos, a spokesman for Germany's Central Command for Maritime Emergencies in Cuxhaven.

Schleswig-Holstein state police spokesman Stefan Jung added, "the investigation is ongoing, but all indications so far suggest that the cause was a technical problem."

TV footage showed a fire on the top deck, while the decks below appeared to be gutted by the fire.

"People were lucky because it all happened on a major shipping route, that's why the other vessels were quickly on hand to rescue people," said Ulrike Windhoevel, a spokeswoman for Germany's maritime emergencies centre.

Authorities allowed the blaze aboard the ship to burn because, "there's a possibility it could capsize if we continue," a Danish navy duty commander said. No oil had spilled, he said.

"At the moment there are four ships at the scene, with more on their way. Their primary purpose is an environmental protection service. If there is an oil spill we can cordon off the scene," said the duty commander, who declined to be named in line with Danish military policy.

Windhoevel said firefighters were still spraying water on the ship's exterior to cool it down.

"But the firefighters cannot put out the blaze on the ship, because at some point it would sink because of all the water in it," she said.

Once the fire has stopped burning, authorities hope to be able to pull the ferry to a nearby harbour, where the accident's cause can be thoroughly investigated, Harlos said.

The Lithuanian-flagged ferry was travelling from the German port of Kiel to Klaipeda, Lithuania, authorities said.

Passengers and crew were evacuated from the ferry by lifeboat and taken by another ferry to a naval base near Kiel, officials and the shipping company DFDS said. The passengers were mostly Lithuanians, DFDS spokesman Gert Jakobsen said.