"The toll is unfortunately a tragic one," he said at a press conference in Rome.
Italian coastguard chief said 94 asylum-seekers drowned and 255 are missing after a boat carrying some 500 people caught fire and capsized near an island off Lampedusa on Thursday.
A three-year-old boy and two-year-old girl were among those who died in the tragedy which happened just a few hundred metres from the shore.
One woman initially thought dead and brought back to the port was revived by medical personnel on the dock when they realised she was still alive.
She has been airlifted by helicopter to a hospital in Palermo in Sicily.
"The survivors are in a state of shock," said Giusi Nicolini, the local mayor of Lampedusa, which is one of the main entry points into the European Union for asylum-seekers crossing from Africa or the eastern Mediterranean.
Hundreds and sometimes thousands of migrants die every year fleeing impoverished and war-torn regions on rickety fishing boats or rubber dinghies.
"We received the first alert at 7:00 am (0500 GMT) when a boat reported people in the water," a spokesman for the coast guard said.
Antonio Candela, a local emergency medical worker, said: "The first assistance was provided by people on pleasure boats who heard the screams."
The migrants said they set fire to a blanket on the boat a few hundred metres from the shore to attract the attention of coast guards after their vessel suffered engine failure and passing fishing boats ignored them.
The fire then spread quickly, sowing panic on board which caused the boat to flip over and eventually sink, as desperate passengers jumped into the water.
Visibly shaken survivors wrapped in reflective thermal blankets — many of them bare-chested — were seen stepping onto the dock in Lampedusa as anemergency worker broke down in tears in images shown on Italian television.
'Tragedy without precedent'
The bodies were being taken to a hangar at the local airport because there was no more room in the local morgue on the remote island, which has apopulation of around 6,000 people.
"This is a tragedy without precedent. In many years of work here I have never seen anything like this," Pietro Bartolo, a local doctor, was quoted by the Italian news agency ANSA as saying.
"We don't need ambulances unfortunately, we need hearses," Bartolo said.
The asylum-seekers said they were from Eritrea and Somalia and left from Libyan shores, officials said.
"We left two days ago from the Libyan port of Misrata. We were 500 on that boat, we could hardly move," one survivor was quoted by the Italian news agency ANSA as saying.
"Three fishing boats spotted us during the crossing but did not rescue us," he said.
Prosecutors have opened an inquiry for multiple murders and a young Tunisian man believed to be a crew member has been detained.
Italian Prime Minister Enrico Letta called the incident "an immense tragedy" in a tweet and Alfano called for more assistance from the European Union to deal with the sharp increase in refugee arrivals seen in recent months.
"This is a European tragedy, not just an Italian one," Alfano said.
Some 25,000 have landed on Italian shores so far this year — more than three times the number for the whole of 2012, although the figure for 2011 at the height of the Arab Spring revolts in North Africa was around 50,000.
Many of the arrivals have been on Lampedusa, which is closer to Tunisia than to Sicily. Most of them have been Eritreans, Somalis and Syrians.
The EU's Home Affairs Commissioner Cecilia Malmstroem called for "solidarity" both with the migrants and with the countries experiencing a rising influx of refugees.
She said a new European system to coordinate maritime search and rescue operations would start in December and called on EU countries to do more to resettle refugees, which she said would help reduce risky crossings.
Pope Francis, who visited Lampedusa in July to plead for more tolerance and attention to the plight of refugees, called for prayers.
"This is shameful!" the pope said at a Vatican conference. "Let us join forces so these tragedies never happen again."