A rescue operation - involving police, ambulance, coastguard and the RAF - was mounted by the emergency services and 31 people were helped out of the water.
Of those, 17 people were taken to The Royal Liverpool Hospital for treatment, mostly for shock, but all were well enough to be discharged.
Nobody was trapped inside the vessel, the fire service said.
The company runs tours on the city's roads with the promise of a "splashdown" ending.
It is the second time in three months that one of the yellow vehicles has sunk.
It is understood that 28 people were led to safety from the bus, including a baby whose mother held her above the water on the roof of the sinking craft. Three more were saved from the water by firefighters.
A spokesman for Merseyside Police said everyone had been accounted for and added: "A police cordon remains in place at the scene and a multi-agency investigation into the full circumstances of the incident is ongoing."
Eyewitnesses reported seeing a large number of people swimming in the Mersey as the vessel, one of four in the company's fleet, sank in Salthouse Dock, part of the Albert Dock complex.
People could be seen throwing life-rings into the water to help those trying to escape.
In March, the entire fleet was ordered out of the water after a bus, which was not carrying passengers, sank.
Then, in May, the Queen and Prince Philip had a ride on one of the yellow Duckmarine buses when they visited the region as part of her Diamond Jubilee tour to celebrate 60 years on the throne.
Writing on Twitter, the Mayor of Liverpool Joe Anderson refused to be drawn on the future of the vessels until he knew everybody involved in the latest incident was safe.
He wrote: "Albert Dock Duck incident, look I will not make any official comment on future of these ducks until we know people are all ok+accounted for."
Mr Anderson later tweeted: "Albert Dock incident: police confirm 31 people entered the dock, 31 people have been accounted for. Everyone ok, some people still in hospital."
According to the Liverpool Echo, Pearlwild Ltd, which operates the fleet, faces a separate investigation by the North West Traffic Commissioner, with a public inquiry set to be held later this month amid concerns over the operation of the fleet of wartime vehicles.
Chief Fire Officer Dan Stephens said: "Three people have been rescued by firefighters from the water. We have had assistance from a number of agencies on scene. We worked with Merseyside Police, the North West Ambulance Service, the Coastguard and the RAF to account for everyone on board.
"The initial responding firefighters from Toxteth and City Centre community fire stations carried out the rescues. There was no-one trapped from the sinking vessel."
Mr Stephens continued: "Firefighters wearing dry suits and with a safety rope attached to them entered the water and swam to rescue three adults who were in the water. They brought them to safety.
"The firefighters then swam back out to check no-one was inside the vessel. The Search and Rescue Team, based at Croxteth Community Fire Station, also used an underwater camera to check no-one was in the vessel. The vessel was in the water around 25 metres from the dock entry ramp where it enters the water.
"An RAF helicopter assisted us by using thermal imaging cameras to check no-one was in the vessel or under the water.
"All persons have now been accounted for."
spokesman for the Albert Dock said they were "pleased" all 31 passengers and two crew were rescued safely.
"Following the incident, Albert Dock directors would like to praise the response of the emergency services and its onsite security team and will co-operate fully with any investigation," the spokesman added.
The Royal Liverpool Hospital tonight updated its statement and said a final total of 18 people were treated in connection with the incident.
There were no serious injuries and all patients have been discharged.
The company which operates the Yellow Duckmarine buses was unavailable for comment.
But a spokesman for Yellow Duckmarine later said: "Following the incident involving Quacker 1, we are working closely with our regulatory body, The Maritime & Coastguard Agency (MCA) and Merseyside Police.
"The craft involved in the incident holds a valid passenger carrying certificate.
"The craft has now been recovered and following consultation with MCA it has been taken to a place of safe and secure storage in order that a full investigation can take place. That will continue tomorrow morning.
"Our team followed their emergency response procedure, ensuring the safe disembarkation of passengers on board. We were aided in this regard by a number of canal boat owners berthed in Salthouse Dock to whom we would like to express our thanks.
"We would also like to express our thanks to the emergency services and the Albert Dock security team onsite for their immediate and exemplary response.
"We will continue to provide full cooperation with MCA and Merseyside Police.
"We are pleased that all of the passengers who were taken to hospital as a precaution have now been released."