The tourists were on a stopover during a P&O cruise from Brisbane to Noumea in New Caledonia when their bus slammed into a local bus late yesterday.
The Vanuatu Daily Post said on Twitter that three locals died in the accident while P&O said 12 tourists were hurt.
Air ambulances were flying from Brisbane and Noumea to Port Vila to evacuate the badly injured.
"It can now be confirmed that 10 of the Pacific Dawn guests sustained significant injuries," P&O said on its Facebook page.
"Urgent inquiries are being made to ensure the local people are also receiving the best possible medical care."
The Australian Broadcasting Corporation said all the tourists were Australian, with many suffering head injuries, open wounds and bone fractures, adding that three were children.
Tourism is hugely important to the Vanuatu economy and Public Utilities Minister Jotham Napat vowed a full investigation would be carried out into the crash.
"The Vanuatu government is committed to ensuring safety on our roads," he said in a statement.
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