A senior Israeli military official said there was "conclusive evidence" that rockets were on board and that officials could say "with certainty that Iran is behind this operation," Haaretz reported.
The ship's crew is in Israeli custody, and the ship is being towed to Eilat, the Jerusalem Post said. The vessel was boarded near Port Sudan early Wednesday.
The officer said the rockets originated in Syria, were loaded onto airplanes at Damascus airport, then transported to Iran, where they were loaded onto the cargo ship that set sail about 10 days ago bound for a port in Sudan.
Special forces boarded the KLOS C, which was registered in Panama. A search uncovered dozens of 302mm rockets that were fired into Israel by Hezbollah during 2006 war with Lebanon, Haaretz said.
A senior Israeli officer told reporters said the rockets' final destination was meant to be in Gaza.
"They intended to unload the rockets in Port Sudan and transfer them to Gaza from there, presumably through Sinai," the officer said.
Defense Minister Moshe Ya'alon said the shipment provided proof that "Gaza is a terrorist entity under Iranian auspices preparing to strike deep into Israel."