Five tourists have been rushed to hospital after the boat burst into flames near the Spanish island.
Holidaymakers watched in horror as thick plumes of black smoke billowed into the blue skies.
Shocking video showed flames flaring up as a tourists from a nearby yacht rushed over to the boat.
They then dramatically pulled four women and a man from the water after the vessel blew up near Costa Adeje.
One man, aged 45, and a 25-year-old woman suffered back injuries, while the others suffered cuts, bruises and leg injuries.
They have all been taken to hospital, with medics describing their injuries as “moderate” but not life threatening.
During the rescue a Spanish coast guard helicopter was dispatched to scan the area for more victims.
They then confirmed all on board had already been rescued by nearby vessels.
The boat sank shortly after specially-trained maritime rescue workers swooped to extinguish the fire.