The Ulysse, operated by the Tunisian operator CTN, struck the Cyprus-based CLS Virgina while it was anchored about 30 kilometres off the northern tip of the island at around 7:30 am, the regional naval authority said.
The Virginia was not carrying any cargo at the time.
"The collision caused considerable damage, with an opening several metres long in the CLS Virginia's hull," the naval authority said, adding that the leaking liquid was spread over "several hundred metres".
Officials said they had not yet identified the liquid, but a source close to the inquiry said it was probably leaking "from one of the fuel tanks".
The cause of the accident was not yet known, though weather conditions are not thought to have been a factor, with relatively calm seas and good visibility in the area at the time.
The Tunisian ship "was maybe going too fast compared to its ability to react," the source told AFP.
A tugboat has been dispatched to the scene and the French navy has also sent a vessel specialised in containing and cleaning up pollution spills.
"The Italian authorities offered their help and we've accepted it," the naval authority said.
Officials will begin by setting up equipment to contain the spill.
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