The captain of the luxury 114,500-tonne Costa Concordia was being held in jail accused of multiple manslaughter, causing a shipwreck and abandoning ship, Italian police said.
Passengers, some saying it felt like a rerun of the Titanic disaster, told of people leaping into the sea and fighting over lifejackets in panic when the ship hit a rock and ran aground near the island of Giglio late on Friday.
"I was sure I was going to die. We were in the lifeboats for two hours, crying and holding on to each other," said Antonietta Sintolli, 65, breaking down in tears as she recounted the event.
"People were trying to steal lifejackets from each other. We could only get ones for children."
Passengers said mainly Asian crew members, few of them able to speak Italian, struggled to bring order to the evacuation.
Early on Sunday, firefighters found two people still alive in a cabin after making voice contact with them from several decks above, Italian media reported.
An official involved in the rescue operation said two French tourists and a Peruvian crew member were dead.
Death toll fears
There were fears the death toll could rise in one of Italy's worst shipping disasters in years as specialist diving teams checked interior spaces of the vessel.
"We don't rule out the possibility that more people will be lost," said fire services spokesman Luca Cari. It was not clear how many of those unaccounted for could still be trapped in the ship or simply had not been counted among those rescued.
The ship's captain, Francesco Schettino, was arrested on Saturday night for questioning by magistrates, police said.
They said Schettino, whose ship was carrying 4,229 passengers and crew, abandoned the vessel before all the passengers were taken off.
The vessel's operator, Costa Crociere, a unit of Carnival Corp & Plc, the world's largest cruise company, said the Costa Concordia had been sailing on its regular course when it struck a submerged rock.
In a television interview, Schettino said the rock was not marked on any maritime charts of the area.
Costa Cruises president Gianni Ororato said the captain "performed a manoeuvre intended to protect both guests and crew" but it was "complicated by a sudden tilting of the ship".
It remained unclear how the 290-meter long ship had run aground in calm waters so close to the shore. "We'll be able to say at the end of the investigation. It would be premature to speculate on this," said coastguard spokesman Filippo Marini.
The ship was involved in an accident on Nov 22, 2008 when it hit a port wall and was damaged while docking.
In the latest incident the Costa Concordia was left capsized on its side in water 15-20 meters deep, with decks partly submerged, not far from the shore. A large gash was visible on its side.
Local officials expressed concern that the fuel on the ship, at full load as it had just begun the cruise, could spill into the pristine waters.
