The European Causeway vessel has been held in the Northern Ireland port due to “failures on crew familiarisation, vessel documentation and crew training”, the Maritime and Coastguard Agency (MCA) said.
Transport Secretary Grant Shapps said he will not compromise the safety of P&O vessels and insisted that the company will not be able to rush training for inexperienced people.
The company has sacked almost 800 seafarers and plans to replace them with agency staff on cheaper salaries.
Last week P&O's Pride of Hull vessel did a 'midnight flit' to Rotterdam with a skeleton crew and no passengers following protests at the Port of Hull, and will now remain in dry dock the Dutch port for staff training. It was given permission to sail despite union members' concerns.
A spokesperson for the Maritime and Coastguard Agency said: “We can confirm that the European Causeway has been detained in Larne.
“It has been detained due to failures on crew familiarisation, vessel documentation and crew training.
“The vessel will remain under detention until all these issues are resolved by P&O Ferries. Only then will it be reinspected.”
The MCA said there were no passengers or freight on board the European Causeway vessel when it was detained.
Mr Shapps tweeted: “Following my instruction to inspect all P&O vessels prior to entering back into service, the @MCA_Media has detained a ship for being unfit to sail.
“I will not compromise the safety of these vessels and P&O will not be able to rush inexperienced crew through training.”
The detention of ships is based on concerns over their safety and to prevent them going to sea.
The European Causeway entered service in 2000 replacing the Pride of Rathlin, according to the P&O Ferries website.
“Specifically designed for our Cairnryan to Larne route, she has not operated elsewhere and has only been taken out of service if she needs a refit,” the website said.
It comes as Prime Minister Boris Johnson backed Mr Shapps’ call for P&O Ferries’ chief executive Peter Hebblethwaite to quit, over the sacking of 800 workers without notice.
In Larne, the local mayor of the Mid and East Antrim Council, William McCaughey, said they would support the reinstatement of the staff immediately.
“It is ridiculous what P&O has done to the staff, we in Larne would be very keen to see staff reinstated, it is the least that P&O could do,” he told the PA news agency.
Labour’s shadow transport secretary Louise Haigh also called for the sacked workers to be reinstated and for Mr Hebblethwaite to be “barred” as a director for his role in the crisis.
She wrote on Twitter: “The trained, experienced, loyal crew should be reinstated. And the Chief Executive should be barred as a director.
“The shameful misconduct of P&O Ferries has ruined livelihoods, and is harming the UK’s key shipping routes.”
Labour has written to Business Secretary Kwasi Kwarteng asking whether the Government will seek the removal of Mr Hebblethwaite as a director under the Company Directors Disqualification Act 1986.
In a letter, the party accused the Government of “sitting on their hands” rather than taking action to hold P&O to account, adding that the “toothless response risks giving the green light to exploitation”.
Alliance East Antrim MLA Stewart Dickson welcomed the impounding of the ferry as a safety measure.
“It’s not like the crew of an airplane getting off one Easyjet and getting on to the next one where the controls are the exactly the same, and everything is in the same place,” he told PA.
“No two ships are the same, and you cannot just fly a crew in and expect them to be able to sail a ship. Every control will be in a different place, but particularly all those health and safety drills that have to be gone through, everything from lifeboat stations to how each item of equipment operates.
“It seemed to me it was going to be very difficult for staff to be able to take on that role in such a short period of time.
“I am absolutely delighted they have (impounded the ship). This isn’t vengeance against P&O, it’s about passenger safety and the safety of the crew as well.
“It was reckless of the company to think they could not only act in the way in which they did about dismissing staff but they don’t seem to have had a plan as to how they were going to take this forward and now it is falling apart on them.”
Meanwhile, the RMT union said it welcomed the detention of the European Causeway and it demanded the Government “seize the entire fleet” of P&O vessels.
General secretary Mick Lynch said: “The seizing of the European Causeway by the MCA tonight shows that the gangster capitalist outfit P&O are not fit and proper to run a safe service after the jobs massacre.
“This mob should be barred, their ships impounded and the sacked crews reinstated to get these crucial ferry routes back running safely.”
Protests about P&O’s actions are expected to take place in Liverpool, Hull and Dover on Saturday.