Around 40 bodies were found inside the half-sunk boat as it was brought towards the shore by a high tide on Thursday night, while up to 160 were found floating nearby by Libya's coastguard, a representative of Doctors Without Borders (MSF) was cited as telling The Guardian on Friday.
Another 201 people were rescued in the tragedy, which happened off Zuwara, one of Libya's main people smuggling hubs on its western coast.
The sinking comes two days after at least 55 bodies were discovered on three overcrowded migrant boats, 52 of whom were found in the hold of one wooden vessel off Libya's coast.
Wednesday's gruesome discovery was made by a Swedish coast guard vessel whose crew plucked hundreds of other migrants from the waters off the North African nation.
People smugglers have taken advantage of the chaos gripping Libya since the 2011 uprising toppled dictator Muammar Qaddafi to step up their lucrative business.
But the Mediterranean crossing is treacherous, and more than 2,300 migrants and refugees have died trying to reach the European Union this year alone.