The Israeli army said soldiers did not encounter any resistance in the takeover and planned to tow the yacht to Ashdod.
The Dignite al Karame left Greece during the weekend, naming its destination as Egypt. But once in international waters, it changed course for Gaza, hoping to break the Israeli blockade.
Israeli ships surrounded the yacht Tuesday and military officials called on those on board to change course, warning if they ignored the request, they would be boarded, Israel Radio said.
"The boat is surrounded by at least four Israeli ships," Ynetnews quoted Julien Rivoire, a Paris spokesman for the activists, as saying.
Greek authorities thwarted efforts to leave port by about 20 boats that intended to head for Gaza. The French vessel was the only one that succeeded in heading toward Gaza after it told authorities it was heading for Egypt, Haaretz said.
Some 16 activists, including an Israeli journalist and a camera crew from al-Jazeera, are on the boat, Ynetnews said.
Israel has told those seeking to break the Gaza blockade they should head either for Egypt or the port of Ashdod where the goods can be unloaded and transferred overland to Gaza.