Six people feared dead as local officials report that 50 people are still unaccounted for after pride of Italian fleet runs aground.
Holidaymakers from Britain, France, Italy and Germany were forced to flee the 1,500-cabin Costa Concordia in lifeboats when it hit a reef less than two hours after leaving port.
Some leapt overboard and swam to shore as the ship started to sink into the waters near the island of Giglio, off the Tuscan coast.
Francesco Paolillo, the coastguard spokesman, said that at least three bodies were retrieved from the sea and at least three more were feared dead.
Local officials are also reporting that 69 people are still unaccounted for.
By this morning, the ship was lying virtually flat off Giglio's coast, its starboard side submerged in the water.
Pregnant women and young children were among the 3,200 passengers and 1,000 crew on board.
Passengers' dinner on Friday night was interrupted by a loud boom at around 8pm and a voice over the loud-speaker system initially claimed that the ship was suffering an electrical failure, before ordering everyone on-board to don life-jackets.
"It was just like something out of the Titanic," one woman said. "You could tell straight away that the ship had hit something and no way was it an electrical fault."
Fabio Costa, who worked in a shop on the stricken cruise ship, said a number of people were jumping into the sea to swim ashore.
Describing the moment the boat began to list, he told the BBC: "All of a sudden we felt the boat hitting something and everything just started to fall, all the glasses broke and everybody started to panic and run.
"We could only feel that the boat had hit something, we had no idea how serious it was until we got out and we looked through the window and we saw the water getting closer and closer.
"Everything happened really, really fast and we saw the water coming in."
Mr Costa said that once the emergency alarm was set off people started to panic and push each other in a bid to get into lifeboats.
"A lot of people were falling down the stairs and were hurt because things fell on them," he added.
The worker said it took the crew a long time to launch the lifeboats as the vessel had listed so much.
He said: "We just saw a huge rock, that was probably where the ship hit, and people were having huge trouble trying to get on the lifeboats. So at that point we didn't know what to do so it took hours for people to get off the ship.
"It was easier for people to jump into the sea because we were on the same level as that water so some people pretty much just decided to swim as they were not able to get on the lifeboats."
Pictures showed a massive gash in the hull more than 150ft long, with a huge rock embedded in the side of the ship towards the stern.
Helicopters airlifted to safety around 50 people who were trapped on board.
The Costa Crociera company, which operates the seven-day Mediterranean cruise, said there were 1,000 Italians on the ships as well as 500 Germans and around 150 French people but could not confirm whether any Britons were among the evacuated.
The Foreign Office, which is sending a team to the scene, said that a few dozen British passengers are believed to have been on board.
A spokesman said: "We are in close contact with the local authorities and are working urgently to identify British nationals involved.
"A consular team from the British Embassy will shortly be in the area to provide consular assistance."
Philip Metcalf from Dorset described how his daughter Rose, a dancer and entertainer on the Costa Concordia, was brought to safety early this morning.
He said: "My phone rang just before three. I had a message from Rose telling me not to worry that she was OK but there had been a fire or something on board and she had been airlifted from near Tuscany.
"She said she had to wait a long time and that she was one of the last ones to be taken of, as she was staff. It sounds a bit like the Titanic. The boat seemed to have taken on water. I'm just so glad she's alright and she's one of the lucky ones."
Miss Metcalf posted a message on Facebook last night, saying: "My name is Rose, its Friday 13th and I'm one of the last survivors on board the sinking cruise liner off the coast of Italy. Pray for us to be rescued."
A local mayor on the island of Giglio said he was trying to find rooms to house the stranded people overnight.
The company said it was not clear what caused the fault and that an investigation was under way.
A spokesman said: "In this moment all our efforts are focused on the completion of the last emergency operations, besides providing assistance to the guests and the crew who were onboard.
"The company will fully co-operate with the relevant authorities in order to determine the causes of what happened."
The company said the evacuation of the ship started promptly, but the operation was hindered as the vessel started to list on one side.
Some passengers claimed that the crew had failed to give instructions on how to evacuate the ship. An evacuation drill was scheduled for Saturday afternoon.
Melissa Goduti, 28, an American on board the ship told the Associated Press: "It was so unorganised, our evacuation drill was scheduled for 17:00 (16:00 GMT). We had joked what if something had happened today."
The cruise ship had set off from the Civitavecchia port near Rome earlier on Friday and had been due to visit Palermo, Cagliari, Palma, Barcelona and Marseille.
Italian media reported that the ship had been involved in a previous accident in Italian waters in 2008, when strong winds around Palermo, the Sicilian capital, caused the ship to bang against the port's dock. The ship was reported to have suffered damage but nobody aboard was injured.
Two years ago, a Costa Cruises ship crashed into a dock at the Egyptian Red Sea resort of Sharm al-Sheikh, killing three members of the crew.
The ship is described on the firm’s website as “one of the biggest ships in the Costa fleet, a real floating temple of fun that will amaze you.”
Prices begin at around £400 but can exceed £1,200 for the first-class cabins.
Pregnant women and young children were among the 3,200 passengers and 1,000 crew on board.
Passengers' dinner on Friday night was interrupted by a loud boom at around 8pm and a voice over the loud-speaker system initially claimed that the ship was suffering an electrical failure, before ordering everyone on-board to don life-jackets.
"It was just like something out of the Titanic," one woman said. "You could tell straight away that the ship had hit something and no way was it an electrical fault."
Fabio Costa, who worked in a shop on the stricken cruise ship, said a number of people were jumping into the sea to swim ashore.
Describing the moment the boat began to list, he told the BBC: "All of a sudden we felt the boat hitting something and everything just started to fall, all the glasses broke and everybody started to panic and run.
"We could only feel that the boat had hit something, we had no idea how serious it was until we got out and we looked through the window and we saw the water getting closer and closer.
"Everything happened really, really fast and we saw the water coming in."
Mr Costa said that once the emergency alarm was set off people started to panic and push each other in a bid to get into lifeboats.
"A lot of people were falling down the stairs and were hurt because things fell on them," he added.
The worker said it took the crew a long time to launch the lifeboats as the vessel had listed so much.
He said: "We just saw a huge rock, that was probably where the ship hit, and people were having huge trouble trying to get on the lifeboats. So at that point we didn't know what to do so it took hours for people to get off the ship.
"It was easier for people to jump into the sea because we were on the same level as that water so some people pretty much just decided to swim as they were not able to get on the lifeboats."
Pictures showed a massive gash in the hull more than 150ft long, with a huge rock embedded in the side of the ship towards the stern.
Helicopters airlifted to safety around 50 people who were trapped on board.
The Costa Crociera company, which operates the seven-day Mediterranean cruise, said there were 1,000 Italians on the ships as well as 500 Germans and around 150 French people but could not confirm whether any Britons were among the evacuated.
The Foreign Office, which is sending a team to the scene, said that a few dozen British passengers are believed to have been on board.
A spokesman said: "We are in close contact with the local authorities and are working urgently to identify British nationals involved.
"A consular team from the British Embassy will shortly be in the area to provide consular assistance."
Philip Metcalf from Dorset described how his daughter Rose, a dancer and entertainer on the Costa Concordia, was brought to safety early this morning.
He said: "My phone rang just before three. I had a message from Rose telling me not to worry that she was OK but there had been a fire or something on board and she had been airlifted from near Tuscany.
"She said she had to wait a long time and that she was one of the last ones to be taken of, as she was staff. It sounds a bit like the Titanic. The boat seemed to have taken on water. I'm just so glad she's alright and she's one of the lucky ones."
Miss Metcalf posted a message on Facebook last night, saying: "My name is Rose, its Friday 13th and I'm one of the last survivors on board the sinking cruise liner off the coast of Italy. Pray for us to be rescued."
A local mayor on the island of Giglio said he was trying to find rooms to house the stranded people overnight.
The company said it was not clear what caused the fault and that an investigation was under way.
A spokesman said: "In this moment all our efforts are focused on the completion of the last emergency operations, besides providing assistance to the guests and the crew who were onboard.
"The company will fully co-operate with the relevant authorities in order to determine the causes of what happened."
The company said the evacuation of the ship started promptly, but the operation was hindered as the vessel started to list on one side.
Some passengers claimed that the crew had failed to give instructions on how to evacuate the ship. An evacuation drill was scheduled for Saturday afternoon.
Melissa Goduti, 28, an American on board the ship told the Associated Press: "It was so unorganised, our evacuation drill was scheduled for 17:00 (16:00 GMT). We had joked what if something had happened today."
The cruise ship had set off from the Civitavecchia port near Rome earlier on Friday and had been due to visit Palermo, Cagliari, Palma, Barcelona and Marseille.
Italian media reported that the ship had been involved in a previous accident in Italian waters in 2008, when strong winds around Palermo, the Sicilian capital, caused the ship to bang against the port's dock. The ship was reported to have suffered damage but nobody aboard was injured.
Two years ago, a Costa Cruises ship crashed into a dock at the Egyptian Red Sea resort of Sharm al-Sheikh, killing three members of the crew.
The ship is described on the firm’s website as “one of the biggest ships in the Costa fleet, a real floating temple of fun that will amaze you.”
Prices begin at around £400 but can exceed £1,200 for the first-class cabins.
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