The disaster took place on Thursday off the southern Italian island of Lampedusa, when a fishing boat carrying about 500 African migrants caught fire and sank.
Italian authorities have previously put the death toll at 94, including several women and four small children.
But according to the ANSA news agency, divers have found around 100 more bodies under the wreck of the boat that was carrying them from Libya.
Dozens of others are still missing and unaccounted for.
The 20-meter vessel caught fire after the migrants, mainly from Somalia, Eritrea and Ethiopia according to media reports, set fire to a blanket after the ship started to take water in order to attract the attention of passing ships.
But the fire soon spread to the rest of the boat, and the ship capsided as migrants moved to avoid the fire.
"We decided to light a fire to get us notice. But the bridge was contaminated with oils, and in a few moments the boat was engulfed in flames," one of the migrants was quoted as saying by Corriere della Sera newspaper.
Divers were still searching for possible survivors of the deadliest accidents over recent months in the Mediterranean Sea crossing that thousands of African migrants make every year.
So far, 155 people have been rescued.
The ANSA news agency said the Italian police had detained one of the survivors - a Tunisian national suspected of being the "human trafficker."
Italian Prime Minister Enrico Letta described the accident as a huge tragedy. He rushed to the scene with Deputy Prime Minister and Interior Minister Angelino Alfano.
Thousands of African migrants try the hazardous Mediterranean crossing to Italy every year. A recent study found some 6,200 migrants had died in southern Italian waters since 1994.
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