As many as 700 people are feared dead after a boat carrying migrants capsized off the Libyan coast overnight, a United Nations official said on Sunday.

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.

A number of Italian coast guard and naval vessels were being sent in rescue operations.

The boat is believed to have capsized when migrants moved to one side of the overcrowded vessel when a merchant ship approached.