More than 140 have been rescued but hundreds are missing, according to reports.
In a press release, the UN High Commissioner for Refugees António Guterres expressed his shocked at the news of the tragedy and commended the swift action taken by the Italian coastguard to save lives.
There were an estimated 500 passengers on the boat, which originated from Libya, and caught fire half a mile from the coast.
Thursday's incident was the second boat disaster this week off Italy's coast. Thirteen men drowned off the southern coast of Italy on Monday when they attempted to swim ashore from a foundering vessel.
"There is no miraculous solution to the migrant exodus issue," said Italian Foreign Minister Emma Bonino. "If there were we would have found it and put it into action."
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