The submarine is believed to have disappeared in waters about 60 miles (95 kilometers) north of Bali, he said.
Tjahjanto said the navy has deployed ships to search the area and has asked for help from Singapore and Australia, which have submarine rescue vessels.
Local media reports said the navy believes the ship sank into a trough at a depth of 700 meters (2,300 feet). There was no immediate information about why it went missing.
The German-built submarine, which has been in service since the early 1980s, was rehearsing for a missile-firing exercise that was to take place on Thursday and be attended by Tjahjanto and other military leaders.
Indonesia currently has a fleet of five submarines and plans to operate at least eight by 2024.