The flight, which departed shortly before midnight Thursday local time, was diverted to Denpansar International Airport in Bali, Indonesia "due to a No. 2 engine defect."
It landed at 03:39 local time (3.39 PM ET).
The plane was met by fire services upon arrival in Bali but was able to taxi to the gate normally, the airline says. There were no reported injuries on board, according to a statement released by the airline.
Flight CX170, an Airbus A330, had 254 passengers on board, and 13 crew members.
The airline also tweeted an assurance that the flight was able to land safely. The aircraft remains at the Indonesian airport.
Cathay said it had provided hotel accommodation for the passengers while it investigated the issue, and would help move them onward from Indonesia.
"We are assisting passengers to take other flights to their final destinations," the statement said. By Friday morning (Thursday evening ET), some passengers had left the island on other flights.
A Perth resident and musician, Joel Sirna, who says he was on the flight, told CNN that an engine caught fire. He said there "were flames and sparks flying out of" the right-hand side engine.
"The lights went out and all the TVs turned off," he says. "It's like the plane went into shut down mode.
"The pilot announced the issue and stated we will be making an emergency landing in Bali in approximately 10 minutes. However we were airborne for approximately 30 minutes before touching down."
He says the flames coming out of the starboard engine were visible for at least a minute.
A spokesperson for the airline, however, disputed the claim, and told CNN that she could "confirm that there (was) no fire in the engine (or) cabin."
Cathay said in a statement there was no fire on board and no passengers or crew were injured.
"Safety remains Cathay Pacific's highest priority, and we apologize for the inconvenience caused to passengers," it said.
Sirna says that he and his companions have had other flights booked for them and will be leaving the island at midnight tonight, 24 hours after first leaving Perth.
The airline has one of the best safety records
in the industry, according to industry watchdog AirlineRatings.com