At least 37 people have been rescued, but reports suggest the MV Nyerere may have been carrying as many as several hundred passengers.
More recently, 200 people were confirmed dead when the MV Spice Islander I sank off the coast of the archipelago of Zanzibar in 2011.
This latest incident underlines the issue of unsafe overcrowding on ferries in the region.
No casualty numbers have been given but a local media had reported that five people died and 102 rescued.
The death tool from a ferry accident in Tanzania has reached eighty-six as rescue operations continue, a local newspaper, The Citizen Tanzania, reported on Friday morning.
Rescuers were frantically searching for those trapped on board the MV Nyerere on Thursday evening after the boat began to sank en route between the island of Bugolora and Ukara.
- However, credible sources told the Nation that the vessel with 100-pasenger capacity ended up ferrying at least 300 people, the majority traders.More news: Samsung Galaxy A7 official, leaves A Galaxy Event to A9 Pro
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However, it was hard to establish just how many passengers there were as the person dispensing tickets drowned with the machine recording the data.
The Tanzania Electrical, Mechanical and Electronics Services Agency, in charge of servicing the vessels, urged patience in a statement as rescue efforts began.
Tanzania has been hit by several major ferry disasters over the years.
The previous September had seen an even worse disaster.
At least 44 people died when the passenger ferry sank between two islands in Lake Victoria on Thursday.
It remains unclear how many people are still missing.
Such ferries often carry hundreds of people and are overcrowded.