Terrified tourists leapt overboard and screamed in horror when a boat caught fire on its way to Thailand's notorious 'Death Island' this morning.

Dozens of backpackers were crammed onto the The Ko Jaroen 2 ferry when a blaze erupted in its engine room around three nautical miles from Koh Tao at around 6:30 am local time.

Footage shows billowing smoke engulfing the vessel as panicked tourists wearing life vests awaited rescue. Some jumped overboard to escape the hellish inferno.

Police and coast guards saved the 97 tourists and 11 crew members onboard before the fire swallowed the ferry's bow. Several passengers were taken to hospital for smoke inhalation.

Police Colonel Chokchai Sutthimek, superintendent of the Koh Tao Police Station, said: 'The vessel involved was the Ko Jaroen 2, a night ferry that also serves as a cargo boat. It was bound for Koh Tao and left the pier from Surat Thani at 11 pm last night.'

'At the time of the incident, there were 97 passengers, including Thai and foreign nationals, as well as 11 Burmese boat crew, along with cargo onboard.

'The fire originated in the engine room while the boat was mid-sea and approaching the pier at Koh Tao, causing panic among passengers, some of whom jumped overboard.

'After receiving the report from authorities and boat operators at Koh Tao, we swiftly dispatched a rescue boat to evacuate all passengers and crew back to the coast.

'Some of them suffered minor injuries from smoke inhalation.'

Officers said that all 108 people were safely returned to shore while authorities were towing the Ko Jaroen 2 back to pier.

An investigation has now been launched to determine the cause of the fire.

Just two days earlier, a holiday liveaboard boat was also engulfed in flames in southern Thailand.

The diving vessel Seaworld 1 was ravaged by the inferno while it was approaching the Thap Lamu Pier in Phang Nga province on April 2.

No injuries were reported in that fire as only one person, who managed to jump into the water to escape, was onboard at the time.

Koh Tao was dubbed Death Island following the murders of British backpackers Hannah Witheridge and David Miller in 2014. Previous cases of tourist deaths emerged and there have been several unexplained deaths of tourists since, leading to the island be branded 'cursed'.

Authors, documentary makers and researchers have blamed corrupt Thai police and a powerful clique of local families that control the island for covering up the murders of Hannah and David, with innocent Burmese nationals Zaw Lin and Win Zaw Tun allegedly framed for the crime.

Author Suzanne Buchanan said she was forced 'to flee Thailand for her own safety' having received death threats and arrest warrants for exposing alleged crimes on Koh Tao and its neighbouring 'lawless' islands.