Wellington Harbourmaster Grant Nalder says it blacked out around 10.30pm, not long into its freight sailing bound for Picton, near Sinclair Head.
By 2am Friday, the tug boat Tapuhi was towing Connemara back to Wellington, and a second tug, Tiaki, was providing steerage.
By 6am it was towed to Pipitea Wharf but all people remained on board.
Nalder said Connemara had 88 people on board, and although the situation was not a rescue, Maritime New Zealand and the Rescue Co-ordination Centre had been keeping an eye on them.
Both the privately owned Bluebridge and the state-owned Interislander have had engine failures in their ferries this year.
In May, passengers on board a different Bluebridge ferry, Strait Feronia, were briefly plunged into darkness when their ship lost power coming into Wellington Harbour.
In 2023, the Connemara hit a wharf while it was leaving Wellington, causing a "decent dent" on the hull and a "very small hole" above the waterline, Nalder said at the time.
The vessel returned to port and passengers were able to disembark safely.
The Connemara underwent repairs and was back in service later that day.
Interislander ferries have also been plagued by issues in recent months - most notably the grounding of the Aratere near Picton in June.
The ferry, which was on a crew-only sailing, ran aground after a staff member mistakenly changed its course.
