Military chief Hadi Tjahjanto on Wednesday said the KRI Nanggala 402 was participating in a training exercise when it missed a scheduled reporting call.
The submarine was believed to have disappeared in waters about 95 kilometres north of Bali, he said.
Tjahjanto said the navy had deployed ships to search the area and asked for help from Singapore and Australia, which have submarine rescue vessels.
Local media reports said the navy believed the ship sank into a trough at a depth of 700 metres. There was no immediate information about why it went missing.
The German-built submarine, which has been in service since the early 1980s, was rehearsing for a missile-firing exercise that was to take place on Thursday. Tjahjanto and other military leaders were to attend.
Indonesia currently has a fleet of five submarines and plans to operate at least eight by 2024.
The country has faced growing challenges to its maritime claims in recent years, including numerous incidents involving Chinese vessels near the Natuna Islands.
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