Earlier the coastguard said 80 people had been recovered alive, “including some who managed to reach the shore after the sinking”.
Manuela Curra, a local government official, told Reuters news agency that the boat had left the Turkish coastal city of Izmir three or four days ago.
Those onboard were mainly from Afghanistan, Pakistan, Somalia and Iran, according to Italian officials, and President Sergio Mattarella said many were fleeing “very difficult conditions”.
One survivor was arrested on migrant trafficking charges, customs police said.
The vessel is reported to have sunk after it crashed against rocks during rough weather, sparking a large search-and-rescue operation on land and at sea.
Video footage shows timber from the wreckage that has been smashed into pieces washing up on the beach, along with parts of the hull.
Survivors are seen huddled under blankets, attended to by Red Cross workers. Some have been taken to hospital.
“There had been landings but never a tragedy like this,” the mayor of Cruto, Antonio Ceraso, has told Rai News.
Italian Prime Minister Giorgia Meloni – elected last year partly on a pledge to stem the flow of migrants into Italy – expressed “deep sorrow” for the incident, blaming the deaths on traffickers.
“It is inhumane to exchange the lives of men, women and children for the price of the ‘ticket’ they paid in the false perspective of a safe journey,” she said in a statement.
“The government is committed to preventing departures, and with them the unfolding of these tragedies, and will continue to do so.”
Carlo Calenda, Italy’s former economy minister, said people in difficulty at sea should be rescued “whatever the cost”, but added that “illegal immigration routes must be closed”.
Ms Meloni’s right-wing government has vowed to stop migrants reaching Italy’s shores and in the last few days pushed through a tough new law tightening the rules on rescues.
According to monitoring groups, more than 20,000 people have died or gone missing at sea in the central Mediterranean since 2014.
European Commission President Ursula van der Leyen said she was “deeply saddened” by the incident, adding that the “loss of life of innocent migrants is a tragedy”. She said it was crucial to “redouble our efforts” to make progress on reforming EU asylum rules to tackle the challenges regarding migration to Europe.
Pope Francis, who often defends the rights of migrants, has said he is praying for the dead, the missing and those who survived.
Regina Catrambone, director of the Migrant Offshore Aid Station which carries out search and rescue operations in the Mediterranean, told the BBC that European countries must work together to help those in need.
She also called for an end to the “myopic vision” that says that countries that are physically closer to Africa and the Middle East should take the lead on tackling the issue.
“Still there is no co-operation among the European states to actively co-ordinate together to go and help the people in need,” she said, urging governments to work together to improve search and rescue efforts and develop safe and legal routes.
