Flight JT 610 was on a scheduled flight to Pangkal Pinang, the main town in the Bangka Belitung Islands.
It lost contact with ground control a few minutes after take-off, and was last tracked crossing the sea - it is unclear if there are any survivors.
The plane was a Boeing 737 MAX 8, a brand new type of aircraft.
Flight JT 610 took off from Jakarta at 06:20 local time on Monday morning (23:30 GMT on Sunday).
It was due to arrive at Depati Amir airport in Pangkal Pinang an hour later but about 13 minutes into the flight, authorities lost contact with the plane.
The pilot had earlier asked to return to Jakarta's Soekarno-Hatta airport, the head of Pangkal Pinang's search and rescue office, Danang Priandoko, told local news outlet Kompas.
At a news conference, officials said the plane had been carrying 178 adults, one infant and two babies, as well as two pilots and five cabin crew.
The head of Indonesia's disaster agency, Sutopo Purwo Nugroho, has tweeted images which he said showed debris and personal belongings that came from the aircraft and had been found floating in the sea.