Survivors said up to 450 migrants had been aboard the fishing vessel when it sank about 12 kilometres (eight miles) off the coast of Rosetta, an Egyptian Mediterranean port city.
The military has said 163 survivors have been rescued so far, with a health ministry official saying 51 bodies had been retrieved.
Authorities have arrested four suspected human traffickers over the tragedy, the latest in what the UN refugee agency expects to be the deadliest year on record for the Mediterranean.
Rescuers said the search would focus on the boat's cold storage room where witnesses said about 100 people had sought refuge as the vessel flipped over.
"The death toll is going to rise," a medical source told AFP.
"On the boat there is a hold used to store fish. It hasn't been opened and there must be a lot of people inside."
The accident comes months after the EU's border agency Frontex warned that growing numbers of migrants bound for Europe were turning to Egypt as a departure point for the dangerous sea journey.
On a beach near Rosetta today, a small crowd gathered with some reading verses from the Koran and others desperately seeking information on relatives who may have been on board.
Many survivors were in police custody. A prosecution official said they would be treated like "victims and not perpetrators" and would be released.
Witnesses spoke of the harrowing moment their vessel, carrying up to 450 people, keeled over due to overcrowding, as well as the agonising hours-long wait for help to arrive.
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