All eight quickly got to safety as North Hudson Regional Fire and Rescue boats moved in and began spraying the 48-foot vessel around 3:30 p.m., responders and witnesses said.
The bulk of the blaze was in the boat's sleeping quarters, "which makes it difficult to extinguish," NHRFR Capt. Jason Hodge said.
Onlookers gathered on either side of the Hudson between Edgewater and 72nd Street.
Leisure rubbernecking boats and jet skiers surrounded the scene and passengers aboard a passing ferry had a bird's eye view as the yacht went under.
The U.S. Coast Guard, New York City Fire Department boats and an NYPD rescue boat also responded.
Determining what happened will be tough with the boat at the bottom of the river. Authorities moored a small buoy to mark the spot.
The Coast Guard said it will also monitor the river for pollution.
Click here to follow Daily Voice Elizabeth and receive free news updates.