The tanker, called the Sanchi, which had been adrift in the East China Sea since January 7, "suddenly ignited" around 4 am GMT (9.30 am Indian Standard Time), China Central Television said.
"Currently it has already sunk", CCTV said, citing the Shanghai maritime search and rescue centre. After that, the tanker, caught fire, with 32 people on board.
Black smoke could still be seen billowing from the site of the collision as oil left behind by the tanker continued to burn.
A burning Iranian tanker listing for days off the coast of China after a collision with another vessel sank Sunday, with an Iranian official saying there was "no hope" of survival for the 29 missing sailors onboard. Picture taken on January 10, 2018.
Meanwhile, China's State Oceanic Administration is expanding the range of its monitoring to "quickly ascertain the spread and drift of overflowing oil" from the boat. Three bodies have been recovered from the sea, leaving 29 crew members still unaccounted for.
Dramatic photos of the scene showed tall flames raging on board the ship, which was carrying nearly a million barrels of crude oil.
"Despite our efforts, it has not been possible to extinguish the fire and recover the bodies due to repeated explosions and gas leaks", Mohammad Rastad, head of Iran's Ports and Maritime Organization, said.
It collided with the CF Crystal, which was carrying grain from the United States, about 160 nautical miles (114 miles) off China's coast near Shanghai.