Four helicopters were involved in the subsequent search during which nine people were plucked out of the sea. Two others were found by lifeboats.
The victims, who had spent several hours in the water, were taken to Weymouth General Hospital. A spokesman said four of the injured were in a critical condition, two 'serious' and four 'stable'.
Three of the four critically-ill canoeists were girls, one of whom was being treated in the intensive care unit.
Other members of the party were said to be suffering from the effects of exposure. The ages of the party ranged from 16 to early 20s, plus one male teacher in his 40s.
Rescuers expressed surprise that the incident had occurred in what were considered to be good weather conditions. Police and coastguards refused to comment on what caused the accident.
It was thought that the party got in trouble after one member capsized after a large wave and was unable to right his canoe. The others then systematically capsized trying to help each other.
The party, which included pupils and teachers from Southway Comprehensive School in Plymouth, set off from the St Albans Centre, Lyme Regis, which specialises in school outings and field trips.
Six teenage girls, two teenage boys, two adult instructors and a teacher set off to canoe towards Charmouth but failed to arrive at a meeting point at the pre-arranged time of 1pm.
The first wreckage was discovered at 3pm by Paul Wason aboard his fishing boat Spanish Eyes. By about 4pm rescue helicopters had spotted seven empty canoes.
Two Royal Navy Sea King helicopters were scrambled from the Portland naval base. They were joined by a Lynx helicopter attached to HMS Beaver, a warship, and a Wessex helicopter from RAF Chivenor. During the initial search, one of the Sea Kings and the Wessex each winched four of the canoeists on board.
The final member of the party was discovered in the sea about an hour after the others and winched aboard a Sea King.
Donald McDonald, district controller of Portland Coastguard, said: 'We do not yet know what caused them to capsize. There was a force 4 wind blowing which produced a slightly choppy sea but nothing too bad.
'The schoolchildren and the adults had obviously been in the sea for some considerable time. They were suffering from hypothermia because the sea temperature at present is quite low. All of them seemed properly dressed and equipped for the trip. They were wearing wet suits and lifejackets. No doubt many of them owe their lives to those safety precautions.'
Lieutenant Commander John Goslin, Lyme Regis harbour master, said: 'We did not even know they were out there until the man from the leisure company came in to phone the coastguards. He was expecting the party back from a short canoe trip down the coast and they were overdue.'
A Royal Navy spokesman said: 'They appear to have gone off course and were about five miles from shore.'
Dennis Camp, chairman of the school's governors, said: 'The atmosphere here is one of shock and concern. We will try and offer advice and counselling. When something like this happens the whole school feels it.'
A spokeswoman for Dorset Police said that a telephone line for worried parents to ring had been set up at Dorset police headquarters. The number is 0929 405555.