Indonesia's search-and-rescue agency said there was little hope of finding survivors.
Hundreds of people are involved in the operation.
Indonesia's disaster agency spokesman posted video of some debris on Twitter.
President Joko Widodo ordered an investigation and urged Indonesians to "keep on praying".
The flight made a request to air traffic control to return to base about 12 miles out from takeoff, but did not indicate there was any emergency, Yohanes Sirait, spokesman for AirNav Indonesia, the agency that oversees air traffic navigation, told CNN. The plane came down about 10 minutes later in waters northeast of Jakarta. The plane was reported to be carrying 181 passengers, including one child and two babies, and eight crew members.
It said there were two foreigners on board the plane: its pilot, originally from New Delhi, and an Italian citizen.
Friends and family members prayed and held hands as they waited at the airport in Pangkal Pinang.
Lion Air officials said the plane was on a 70-minute flight to Pangkal Pinang, off the coast of Sumatra.
"We don't have any information", she said, as her father wiped tears from reddened eyes.
US-based Boeing said it was "deeply saddened" by news of the crash. "I usually arrive in Jakarta at 3 a.m., but this morning I arrived at the airport at 6:20 a.m. and I missed the flight".
"You could feel the explosion from the shockwave in the water", said Mr Gauk, who goes by only one name, telling the pair's story from the beach in Karawang regency.
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An undergarment floats in the area where a Lion Air flight crashed into the Java Sea.
Weather conditions for the flight were safe, according to the Indonesian meteorology agency. It said that winds were weak and clouds normally connected with air turbulence were not present.
The flight took off from Jakarta around 6:20am and was due to have landed in the capital of the Bangka-Belitung tin mining region at 7:20 am, the Flightradar 24 website showed. Lion had operated 11 Boeing 737 MAX 8s and it had no plan to ground the rest of them, he said. The model, which the Chicago-based plane maker says offers better fuel savings, range and reliability over earlier versions, has gained customers in Asia where several dozen low-priced carriers have emerged over the last decade. He didn't know specifics of the problem when asked in a TV interview. The pilot of Flight 610 had more than 6,000 flying hours while the co-pilot had more than 5,000 hours, according to the airline.
"Indeed there were reports about a technical problem, and the technical problem has been resolved in accordance with the procedures released by the plane manufacturer", Sirait said. "I don't know why the traffic at the toll road was so bad".
In its statement, Boeing said it was ready to provide technical assistance to accident investigators, and that all questions about the incident should be directed to Indonesia's National Transportation Safety Committee (NTSC).
Indonesia on Tuesday stepped up its search for passengers of an airliner that plunged into the sea, deploying underwater beacons to trace the flight's black box recorders in a bid to uncover why an almost-new plane crashed minutes after takeoff. Data from FlightAware showed it had reached an altitude of only 5,200 feet (1,580 meters).
In 2007, Indonesian airlines were barred from flying to Europe because of safety concerns. The ban was completely lifted in June this year.
Indonesia's air travel industry is booming, with the number of domestic passengers growing significantly over the past decade, but it has acquired a reputation for poor regulation and its airlines had once been banned from USA and European airspace.
Lion Air, a discount carrier, is one Indonesia's youngest and biggest airlines, flying to dozens of domestic and worldwide destinations.
The Boeing 737 Max 8 is the most recent model of Boeing's famous 737, the United States company's best-selling plane, and is a popular choice among budget airlines around the world.