However Ukerewe District Commissioner Colonel Lucas Magembe said the final death toll could be more than 200, and local officials believed there could have been 300 aboard.
A spokesperson confirmed 40 people had died in the tragedy - with the number expected to rise.
The MV Nyerere went down in the Ukurewe district of Tanzania's Mwanza region, and a rescue operation was launched.
Locals joined emergency teams in rescue efforts.
- It is not clear how many people were on board when the ferry left the island because the ticketing officer was among those who perished in the afternoon disaster.
In 1996, in one of the worst maritime disasters, more than 800 people died when MV Bukoba, ferrying passengers and cargo between Bukoba and Mwanza, capsized.
Regional Commissioner Adam Malima told reporters: "We pray to God to give us hope in such an accident".
Spokeswoman Theresia Mwami denied there being any mechanical problems as the company had carried out heavy maintenance on the ferry in recent months, including two new engines.
Lake Victoria is Africa's largest lake by area, and the world's second largest fresh water lake by surface area, after Lake Superior in North America.
Some of the deadliest have occurred in Tanzania, where passenger boats are often said to be old and in poor condition.
In 2012, 145 people died in a ferry disaster in Tanzania's semi-autonomous archipelago of Zanzibar, in the Indian Ocean, on a vessel that was overcrowded.
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