The Bahamas-flagged Prestige vanished into the ocean at midday, said Lars Walder, a spokesman for the Dutch salvage company SMIT. The ship's oil containers seemed to remain intact, but the toxic fuel was likely to seep out eventually.
An environmentalist warned the wreckage would be like a "time bomb" about two miles down on the ocean floor. Nearly 1.3 million to 2.6 million gallons of fuel oil lost in the initial spill last week have already tainted miles of Spanish beaches, threatening rich fishing grounds and devastating wildlife.
"We hope that the sunken part does not spill its fuel. But still it's a time bomb at the bottom of the sea," said Maria Jose Caballero, who leads the coastal protection project for Greenpeace in Spain.
The best hope for the environment is for the tanks to hold in the chilly waters, said Unni Einemo, senior editor at Bunkerworld, a London-based news service for the marine fuels industry.
"If it sinks into cold water, this stuff solidifies so much that it basically stays there," she said.
If the ship lost its entire cargo of fuel oil, the spill would be nearly twice the size of the 1989 Exxon Valdez disaster in Alaska. Some 10.92 million gallons of crude oil were lost from the Valdez.
"We can say goodbye to the ship and its cargo," said Walder.
The tanker ruptured last Wednesday during a storm. The salvage company estimated it had lost between 1.3 million and 2.6 million gallons of fuel so far. Most of the crew was airlifted off the ship last week.
The spill caused friction between Portugal and Spain over which government would be responsible for the clean-up, but prevailing winds put Spain's coast at a greater risk for damage from the spill
Spanish beaches were mired in oil and scores of animals were covered in sludge. Fishing was prohibited, putting hundreds out of work. The spill threatened some of the region's richest fishing grounds.
Salvage workers have said there is a chance some of the oil compartments could remain intact as they sink 11,800 feet (3,600 meters) to the sea floor, moderating the damage.
But worries about the potential for a massive environmental disaster grew. Fuel oil is more environmentally damaging than crude oil, said Caballero.
"The vessel cracked in the hull because it was very old. There's nothing that makes us believe it won't finally burst and leak all its oil," she said.
The Prestige, owned by Mare Shipping Inc. of Liberia, was bound for Singapore when the storm hit. The American Bureau of Shipping, a Houston-based registration company that makes sure shipping papers are in order, said the Prestige was up to date with its inspections.
The vessel, built in 1976, is operated by the Greece-based Universe Maritime, Ltd., ABS said. The ship's last annual survey was carried out in Dubai in May, and a full drydock inspection was carried out in China in May 2001, ABS said.
Like most tankers still at sea, the 26-year-old Prestige was built without the safety of a double hull, reports CBS News Correspondent Richard Roth. A law banning similar ships won't take effect for years.
Simon Pepper, with the World Wildlife Fund, told CBS he was outraged by the sinking.
"It's an utter disgrace on the international community that a vessel as un-seaworthy as this -- which has literally broken apart without hitting anything -- should be carrying dangerous cargo in a sensitive area."
A Universe Maritime spokesman complained that the damaged vessel had been exposed to storms because it had been forced so far off shore. The Spanish government had ordered the ship far from land to limit contamination.
During last week's storm, the tanker sustained a 30- to 50-foot crack in the hull below the waterline which made it unable to proceed under its own power while salvagers sought a port to do repairs or transfer the oil to another ship.
Spanish soldiers and volunteers were cleaning up some 40 miles of coastline between Cape Finisterre and the city of A Coruna, a town about 370 miles northwest of Madrid.
As onlookers gathered along the walled shoreline of Malpica, orange-jumpsuited emergency workers tried to vacuum oil from the beach. Elsewhere, naval cadets and sailors in green rain slickers used shovels and buckets to try scoop up the sludge as it was carried in by the tide.
Sea birds floated helpless in the blackened waves and fish washed ashore. Volunteers captured about 150 of the injured animals, hoping to save their lives by cleaning off the oil.
"We've seen many dead fish and birds and many others in agony when we rescue them," said Ezequiel Navio, from the World Wildlife Fund's Spanish branch.
Spain's Interior Ministry said the ship went down in an area where Portugal had responsibility for maritime rescue operations. Portuguese Prime Minister Jose Durao Barroso said it was "absolutely sure and confirmed" by the Portuguese Navy that the tanker was lying in Spanish waters.
Both Portugal and Spain had barred the salvagers from towing the ship to any of their ports to protect their fishing and tourism industries.
The tanker's Greek captain, Apostolus Maguras, was jailed on charges of disobeying authorities and harming the environment.
In Brussels, EU officials demanded governments move faster to enforce new inspection rules that could prevent such catastrophes.
Under the rules, ports are required to check at least 25 percent of all ships coming in, starting with older, single-hull vessels. Ships flying "flags of convenience" — or registered in countries with lax safety, labor or tax rules — are to be given priority, said Gilles Gantelet, spokesman for the European Commission.
Spain's northwest coast has suffered several tanker accidents in recent years. The worst was in 1992, when the Greek tanker Aegean Sea lost 21.5 million gallons of crude oil when it ran aground near A Coruna.
The Valdez disaster was the fourth-largest spill by an ocean-going vessel and the sixth largest oil spill of any kind. The largest spill ever was Iraq's deliberate release of 460 million gallons of crude into the Persian Gulf during the gulf war. The biggest accident involving a ship was the 1993 grounding of the Brear off the Shetland Islands, which spilled 26 million gallons of oil.