The rescue workers have heard sounds from within the capsized ship and are trying to reach the people they believe are inside the cabin, state media reported Tuesday.
Twelve survivors have been rescued so far and five bodies have been recovered from the ship, which sank late Monday, according to the Hubei Daily, a state-run newspaper.
The survivors include the captain and chief engineer, who have been taken into custody by police, China's state-run broadcaster CCTV reported.
But the fates of the hundreds of other people on the ship was unclear.
Images from the scene showed the ship upside down in the river, a section of its hull protruding above the surface of the water.
China's state-run broadcaster CCTV carried video of rescue workers walking on the exposed part of the upturned ship. One of them was lying flat on the hull, tapping against the metal with a small hammer.
Divers who knocked on the ship under the water heard responses from inside, the Chutian Metro Daily, a state-run newspaper, reported. It said welders were trying to cut open the cabin.
The ship, the Eastern Star, went down around 9:30 p.m. Monday during a storm over the section of the river that flows through the central province of Hubei, China's state-run news agency Xinhua reported, citing the Yangtze River navigation administration.
Most of the 406 passengers reported to have been on the ship are believed to be over the age of 50. There were also 47 crew members and five travel agency workers on board, according to state media.
Chinese Premier Li Keqiang and other senior officials are on their way to the site of the disaster in Hubei's Jianli county to oversee the emergency response, Xinhua said.
The rescue efforts were initially complicated by bad weather, according to the news agency.
The Eastern Star was reported to have been traveling from Nanjing in eastern China to Chongqing, a city more than 1,200 kilometers (750 miles) inland.
The Yangtze is the third-longest river in the world, stretching 6,300 kilometers (3,915 miles) from its source in the mountains of Tibet all the way to the East China Sea.
The images of the upended ship evoked memories of the sinking of the Sewol, the South Korean passenger ferry that sank last year
, taking the lives of more than 300 people, most of them high school students.