All the passengers disembarked safely (pic from Paul Freeman)
Sinking ferry
None of the 294 passengers on board was injured in the accident which involved the Sea Express One vessel and the Alaska Rainbow.
The Isle of Man Steam Packet Company's Sea Express, which travels between the island and Liverpool is now at the Pier Head.
Water is being pumped from the engine room and about 80 cars remain on board.
Liverpool Coastguard was dispatched to the scene of the accident, which happened near the Alfred Dock on Saturday lunchtime.
Two tugs, two lifeboats and a coastguard team were used to remove crew and passengers from the ferry.
They put the fog horn on, but the next thing we knew there was a big crash
Don Sherry
Passenger
A spokesman for Liverpool Coastguard said: "There were no injuries to any person on the vessels. All 294 passengers and crew disembarked safely."
The port side of the ship's bridge is dented, with several windows smashed.
Passengers have been warned that some of the vehicles on the ship may have been damaged in the crash.
Don Sherry, 50, from Poole, Dorset, was a passenger on The Sea Express One with his 81-year-old mother.
He said the cargo ship crashed into the ferry in heavy fog just a few minutes from docking at Liverpool.
He said: "We came into the Mersey and we hit a very big fog bank. "They put the fog horn on, but the next thing we knew there was a big crash."
Scraping noise'
He added: "All we felt was a big scraping noise and the ship suddenly lunged. It wasn't that bad, no one fell over."
Mr Sherry said all the passengers remained very calm. "No one was screaming, everyone was very together and the staff were brilliant."
He said people were told to put on their life jackets.
The ferry was towed to shore by rescue teams and passengers allowed to disembark.
The Sea Express One, which is 16 years old, underwent an engine overhaul at Birkenhead, Merseyside, last year.
It is currently operating the route usually sailed by the Superseacat Two, which is undergoing maintenance work.
The ''Sea Express One'' (formerly SeaCat Isle of Man) of the Isle of Man Steam Packet was hit twice, in heavy fog on the River Mersey at Liverpool by a tug towing the ''Alaska Rainbow'' cargo ship near the entrance to Alfred Dock, Birkenhead, at 11.20 on Saturday morning.

None of the reported 294 passengers and crew were hurt, and the ferry is moored at Liverpool Pier Head while water is being pumped from the engine room. 80 cars remain on board, and passengers have been warned that some may have been damaged.

While further north a plane was lost in the fog. Missing airplane may have been found.