There is speculation an explosion in either the engine or from a gas bottle may have been to blame for the fire which killed two Germans and one Irishman, all in their 60s, on board The Castaway, a 25-foot pleasure cruiser which had been hired by the men.
An American in his 40s, who is originally from Connecticut but who has been living in Glengarriff with his wife for a number of years, was the sole survivor.
It is understood the men had rented the fibreglass boat, and had gone out in Bantry Bay for a sea angling trip.
The Castletownbere lifeboat station received a call to say the boat was ablaze close to the Roancarrig Lighthouse off Adrigole at approximately 5.45pm.
Coincidentally, a coastguard helicopter from Waterford, in the area responding to reports that two people had become trapped on a ledge in the Caha Mountains, was able to divert to the scene.
It rescued the sole survivor and recovered the bodies of the three victims from the water close to the vessel.
The conditions at the time were understood to be relatively calm though slightly foggy.
All four were airlifted to an airpad in Castletownbere before they were brought by road to Bantry General Hospital. The bodies of the three deceased were kept there while identifications were confirmed last night.
They were expected to be brought to Cork University Hospital so that postmortems could be carried out on the bodies today.
The American man was treated for his injuries in Bantry.
The hospital said last night he was in a stable condition.
All the deceased are understood to have been living in the West Cork area.
Meanwhile, the stricken vessel, which was being monitored by Castletownbere lifeboat, was rapidly swamped with flames and sank shortly after the men were removed from the scene.
A Customs surveillance boat and a French-registered yacht also attended the rescue attempt.
Superintendent John Quilter of Bandon Garda Station said gardaí were coordinating the onshore investigation into the incident with the assistance of Castletownbere Lifeboat personnel and other emergency services.
Gardaí have also asked the Marine Casualty Investigation Board to start their own investigation into what caused the vessel to sink.
Castletownbere county councillor Noel Harrington said: “The community is totally shocked at the tragic loss of these lives. If something goes awry on land that is one thing but when it happens at sea it is a completely different ballgame.
“Our hearts in particular go out to the families that have been left behind.”