The coastguard says there are an unspecified number of casualties. Rescuers have retrieved four bodies from the water as well as several survivors so far.
Rescue operations are underway, but those who have disappeared are "probably dead," a coastguard spokesman said.
The refugees were rescued from 39 overcrowded boats including rubber dinghies some 20 nautical miles off the coast of Libya.
Volunteers and aid groups assisted in 20 separate rescue operations organised by the Italian navy and coastguard.
Vessel was carrying migrants and refugees. Hundreds are stil missing as Greek coastguard continues search.
Some 4,000 refugees have been rescued in Strait of Sicily, Italy's coastguard says
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