A wooden fishing boat packed with at least 600 migrants overturned in the Mediterranean Sea and hundreds are feared dead.

Italian coast guard officials said the vessel had issued a distress call, but the overcrowded boat tilted over to one side just as rescue ships were approaching, throwing many passengers into the water.

Several rescue ships, including Italian and Irish naval vessels, rushed to the site. At least 400 people had been plucked from the waters some 22 nautical miles north of Zuwara and there are fears the death toll could be in the hundreds.

A smuggler nicknamed Az'zubair confirmed by phone from Zuwara that a wooden boat with around 600 people left from Zuwara approximately two days ago, but was unable to confirm it was the vessel that capsized.

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"I sent a couple of zodiacs the other night, and they arrived to Italy safely, but these wooden boats are a problem," said Az'zubair, who is in his late 20s and has been smuggling out of his hometown of Zuwara since 2006.

"People see them, think they're big and think they're strong enough to handle hundreds of people, and this is why they sink."

Survivors were expected to be brought to the port of Palermo today.

This is likely to be the biggest Mediterranean disaster since 800 people drowned last April, sparking the EU to increase funding and personnel for border patrols and rescue operations.