Twenty eight people were rescued in the incident, which happened in an area just off Libyan waters, south of the southern Italian island of Lampedusa, the official said, adding that a number of Italian coast guard and naval vessels were being sent in rescue operations.
If confirmed, the disaster would be one of the worst seen during the decades-long migrant crisis in the southern Mediterranean and would bring the total number of dead since the beginning of the year to more than 1,500.
"At the moment, we fear that this is a tragedy of really vast proportions," Carlotta Sami, a spokeswoman for the United Nations High Commissioner for Refugees, told SkyTG24 television.
No comment was immediately available from the Italian coast guard or navy.
The boat is believed to have capsized when migrants moved to one side of the overcrowded vessel when a merchant ship approached.