The collision was between an Indonesian-registered tanker and a Dominican-registered dredger.
Twelve crew - 11 Chinese nationals and one Malaysian - were on the dredger. Seven of the Chinese nationals have been rescued and taken to hospital.
The tanker's 26 Indonesian crew members were not injured.
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The dredger capsized and was partially submerged, while the tanker was damaged on one side, the Singapore Maritime Port Authority said in a statement.
Authorities are conducting rescue operations and have deployed search vessels and a helicopter.
They said shipping in the busy Singapore Strait was not disrupted.
The accident comes less than a month after a US destroyer and an oil tanker collided near Singapore, leaving 10 US crewmen dead.
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