"There were too many of us. They forced us onto the boat, though there was no space left. Those inside, with the hatch closed, they were killed," a young Syrian survivor was quoted as saying by the Corriere della Sera daily.
"When they tried to get out, to escape the heat, the lack of oxygen and the fumes, the traffickers - fearing the boat would capsize - gave the order to keep them inside, bolting the hatch," the paper said.
Sobbing migrants told police of their attempts to rescue their friends and relatives, and of the traffickers' refusal to open the hatch or turn back even as the tiny hold filled with engine fumes.
"We tried to rescue them as soon as we realised what was happening. We did everything, but it was too late. They looked like they were sleeping," one distraught man was quoted by La Repubblica as saying.
Another said "they piled us in like beasts. We asked to turn back but they said it was too late."
Two of the survivors were arrested Tuesday on suspicion of people trafficking, Italian media reports said.
Stefano Frumento, captain of the frigate which helped rescue the survivors, described the view as he pulled up alongside the boat, with toddlers, pregnant women and men hanging over the sides, waving their arms and calling out.
"I'd never seen that many people crammed in like that in my life. There were over 600 people crushed into 20 metres (65 feet)," he told La Stampa daily.
Rescuers at the port of Pozzallo struggled to pull the bodies free from the small blue fishing boat, in which the migrants -- for the most part from Syria, Eritrea, Somalia and Cameroon - had set sail from the coast of North Africa for Italy.
"The hold, with dozens of bodies piled one on top of another like a mass grave, is the new Auschwitz of the Mediterranean," police officer Nico Ciavola said.
Firemen armed with chainsaws cut away at the narrow entrance to the hold, while a local parish priest waited on the dock to bless the bodies once they were free.
All the dead were men. Among the survivors were 52 children - including some just a few months old - and three heavily pregnant women, the reports said.
Pozzallo mayor Luigi Ammatuna, watching as hearses carrying steel coffins drove onto the portside, said he had "death in my heart. It's like I've been punched in the stomach."
The survivors were placed in a makeshift reception centre, where they are likely to stay while the investigation into the disaster is carried out.
It is not the first time tragedy has struck the so-called "boats of fortune" used for the perilous crossing to Europe. Last year, two shipwrecks saw over 400 refugees drown near the Italian island of Lampedusa, and a series of smaller tragedies have struck in the last few weeks.
The number of migrant arrivals has now soared past the record 63,000 set in 2011 during the Arab Spring uprisings, and EU border agency Frontex has warned that calm seas across the summer will encourage many more to attempt the trip.