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The Italian Coast Guard said the boat turned over when the 600 passengers quickly moved to one side as they were approached by rescue vessels.
Italian officials said they rescued some 373 people and recovered 25 corpses from the choppy waters near the Libyan coast. Survivors were taken to the Italian cities of Palermo and Lampedusa for medical treatment.
The flimsy vessel was carrying Palestinian and Syrian refugees, initial reports said.
Last week, the Italian coast guard said it rescued about 100 people in the Strait of Sicily.
Wednesday’s capsizing marks the worst such accident since 800 migrant refugees drowned in the Mediterranean in April.
Prompted by the rising death toll and Greek and Italian appeals for help in dealing with the huge number of migrant refugees crossing the Mediterranean, European leaders in late June established a protocol for dealing with the crisis.
More than 120,000 boat migrants landed in Greece and Italy in the past six months, the UN says. More than 150,000 landed in Italy last year.
Both countries had for years appealed to the European Union to help relocate the huge numbers making it onto their shores.
The European Union decided that a total of 60,000 refugees will be relocated from Greece, Italy – and outside the EU – and settled in member countries over the next two years. Some 40,000 will come from Greece and Italy.
Earlier, the EU decided to pursue traffickers who earned millions from the illegal migrant journey across the Mediterranean.
EU countries have also pledged to provide more funds and materiel – including added naval vessels and monitoring – to police the waterway.
The BRICS Post with inputs from Agencies