The incident happened off the Mallorcan town of s’Arenal de Llucmajor in the early hours of Sunday morning.
The bodies of the couple, both in their 70s, were found inside the boat by firemen after they managed to get the flames under control.
Although both bodies were burned, police believe the two German nationals died of smoke inhalation before the fire took hold.
The fire, which investigators believe was accidental, started at around 6.15am on Sunday, April 3rd at dock number one of the s’Arenal de Llucmajor yacht club.
Flames broke out towards the back of the vessel near the two engines and fuel tank leading investigators from Spain’s Civil Guard to believe that the fire was caused by an electrical fault.
The body of the woman was discovered in the cabin, while the man’s body was towards the middle of the boat.
According to local newspaper, Diario de Mallorca, firefighters took some time to get the blaze under control due to the boat being made from an extremely flammable material.
According to the newspaper, the husband had been a member of the yacht club for some time, mooring his boat at the dock every winter and going out to sea every summer.
The couple regularly spend periods of time on the Balearic island, sleeping on the boat, before returning to Germany.
A crew member described the couple as "very polite" and said "they always waved from the deck".
The Arenal yacht club (Club Nàutic s'Arenal) was founded in 1952 and is a popular spot for both locals, expats and tourists interested in sailing. The club is located on the Bay of Palma, on Mallorca's southern coast.