A lifeboat and other debris belonging to the Tugberk Imamoglu have been found but there is no sign of the crew, the General Directorate of Maritime Affairs said in a statement.
"There are 10 seafarers on board, including the captain," Transport Minister Abdulkadir Uraloglu said.
"They are all Turkish. We can say that the sinking occurred rapidly in 11 minutes. No one has been found alive."
Two helicopters and 12 search and rescue vessels are searching the area.
The ship collided with the Turkish-flagged tanker Alsu in the Marmara Sea, the statement said. An emergency signal was received from the Tugberk Imamoglu and the first rescue craft reached the site 12.10pm AEST on Wednesday.
The vessel, which was carrying rolled steel, collided with the Alsu about 32km south of Silivri, a western suburb of Turkey's largest city.
"It is assessed that the Tugberk Ä°mamoglu vessel sank because it did not respond to any calls and the mobile phones of the personnel on board went unanswered," the maritime directorate said.
The 90m cargo ship was travelling from Turkey's Mediterranean post of Iskenderun to Eregli in the Black Sea. The 91m Alsu is an oil or chemical tanker sailing from Kocaeli, east of Istanbul, to Aliaga on the Aegean coast, according to the Marine Traffic website.
The rescue operation comes as Turkish naval units are helping search for a passenger ferry that sank off the coast of Cyprus on Sunday. Eight people died when the Filo Jet sank and 20 remain missing.
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