About 120 migrants were aboard the inflatable dinghy at the time, survivors brought ashore in Al-Hmidiya east of the capital Tripoli .
The Libyans managed to rescue 16 migrants from the group and recovered the bodies of three children.
Coast guard spokesman Ayoub Gassim quoted a Yemeni survivor as saying the boat carried around 120-125 migrants, including women and children, before it capsized.
The Libyan coast guard also intercepted three smuggling boats carrying around 345 migrants east of Tripoli.
Libya is the main departure point for asylum seekers attempting to reach Europe by sea. Many refugees have crossed the central Mediterranean to Italy over the past four years as human traffickers take advantage of a security vacuum in Libya that has existed since the toppling of long-time dictator Muammar Gaddafi, who was killed in October 2011.
Thousands of other asylum seekers have perished at sea.
