A navy spokesperson said KD Perantau, a hydrographic vessel, was undergoing refitting maintenance at dock when it became flooded on Tuesday at about 11.15pm.
"Efforts are being conducted to rescue the vessel from sinking.
"There have been no lives loss or reported injuries during the incident," he said Wednesday.
The vessel was handed over to Limbungan Boustead for the maintenance works on Nov 10 and was expected to be handed back over to the Navy on Aug 10 next year.
The spokesman said that all equipment on board of the vessel, including its motor, pumps and navigation equipment had been taken off the ship before the incident occurred.
"This is the procedure whenever a ship is undergoing refitting works.
"A board of inquiry will be set up to identify the cause of the incident," he added.