Libya’s coastguard confirmed the news on Friday, adding that it had managed to rescue only 14 survivors from the boat just east of Tripoli.
The exact number of people thought to have drowned, and where they were travelling from, was not immediately clear.
Libya has emerged as a major transit point to Europe for those fleeing poverty and civil war elsewhere in Africa and the Middle East.
Migrants travelling to Europe usually do so in flimsy inflatable boats provided by smugglers that often get punctured or break down.
The news came as the UN's migration and refugee agencies praised an EU deal about taking in migrants from across the Mediterranean region.
It was agreed at this week's EU summit in Brussels that secure centres would be set up by countries in the bloc to process asylum claims.
Leonard Doyle, spokesman for the International Organisation for Migration, said it was "very pleased at the solidarity and consensus" that emerged from the summit, in particular with the "front line states" like Italy.
Mr Doyle said he believed that most of the "disembarkation centres" planned by the EU would be in Europe, though he said it was up to the EU to determine which countries would host them.
Charlie Yaxley, a spokesman for refugee agency UNHCR, said it was "still awaiting the legal analysis" of the summit's outcome, but would welcome greater collaboration on asylum.
He noted that recently, for the fifth year in a row, the "grim milestone" of 1,000 migrant deaths in the Mediterranean was crossed.
