"The towfish collided with a mud volcano which rises 2,200 metres from the seafloor resulting in the vehicle's tow cable breaking," said the Joint Agency Coordination Centre, the Australian authority in charge of the search.
"The towfish and 4,500 metres of cable became separated from the vessel and are now resting on the sea floor."
No one was hurt, and the agency said it was optimistic the towfish would be recovered "at a later date.
"The Fugro Discovery towing vessel was on its way back to the port of Freemantle on the western Australia coast to pick up a replacement cable.
It was expected to arrive there on January 30.
The Fugro Discovery has a spare towfish that was already being prepared, the statement said.
The plane operated by the Malaysian flagship carrier took off from Kuala Lumpur carrying 239 people bound for Beijing on March 8, 2014 but went missing an hour later.
The search has focussed on the southern Indian Ocean, where calculations indicate it was most likely to have crashed, but has not found anything.
A piece of wreckage that washed up on the French territory of Reunion Island in June was confirmed to have come from the ill-fated plane, and was possibly borne there by the currents.
Another piece of aircraft debris washed up in Thailand on Saturday and was being investigated, with experts saying the appearance and location of the latest debris made it unlikely to be part of the missing Boeing 777.
DPA