By Steve Scherer

ACCUMOLI, Italy (Reuters) - Rescue teams were working through the night to try to find survivors under the rubble that remained of central Italian towns flattened by an earthquake that hit in the early hours of Wednesday, killing at least 159 people.

One hotel that collapsed in the small town of Amatrice probably had about 70 guests, and only seven bodies had so far been recovered, said the mayor of the town that was one of the worst hit by the quake.

The strong 6.2 magnitude quake razed homes and buckled roads in a cluster of mountain communities 140 km (85 miles) east of Rome. It was powerful enough to be felt in Bologna to the north and Naples to the south, each more than 220 km (135 miles) from the epicenter.

"Tonight will be our first nightmare night," said Alessandro Gabrielli, one of hundreds preparing to sleep in tents erected by rescue workers in fields and parking lots, each one housing 12 people whose homes had been destroyed.

"Last night, I woke up with a sound that sounded like a bomb," he added.

Rescuers working with emergency lighting in the darkness saved a 10-year-old girl, pulling her out of the rubble alive, where she had lain for some 17 hours in the hamlet of Pescara del Tronto.

Many other children were not so lucky. In the nearby village of Accumoli, a family of four, including two boys aged 8 months and 9 years, were buried when their house imploded.

As rescue workers carried away the body of the infant, carefully covered by a small blanket, the children's grandmother blamed God: "He took them all at once," she wailed.

Prime Minister Matteo Renzi said the Cabinet would meet on Thursday to decide measures to help the affected communities.

"Today is a day for tears, tomorrow we can talk of reconstruction," he told reporters late on Wednesday as he announced 120 bodies had been found and 368 people had been taken to hospital.

TOLL COULD CLIMB

The death toll rose to 159 a few hours later. With people still unaccounted for, the civil protection department warned it could climb higher.

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Aerial photographs showed whole areas of Amatrice, last year voted one of Italy's most beautiful historic towns, flattened by the quake. Inhabitants of the four worst-hit small towns rise by as much as tenfold in the summer, and many of those killed or missing were visitors.

Amatrice's mayor, Sergio Pirozzi, said its best-known accommodation, Hotel Roma, which probably had around 70 guests at the time of the quake, had collapsed and only seven bodies had been found under the rubble.

The civil protection agency said it was trying to determine how many people were staying in the hotel.

Most of the damage was in the Lazio and Marche regions, with Lazio bearing the brunt of the damage and the biggest toll. Neighboring Umbria was also affected. All three regions are dotted with centuries-old buildings susceptible to earthquakes.

Italy's earthquake institute, INGV, said the epicenter was near Accumoli and Amatrice, which lie between the larger towns of Ascoli Piceno to the northeast and Rieti to the southwest.

It was relatively shallow at 4 km (2.5 miles) below the earth's surface. INGV reported 150 aftershocks in the 12 hours following the initial quake, the strongest measuring 5.5.

Italy sits on two fault lines, making it one of the most seismically active countries in Europe.

The last major earthquake to hit the country struck the central city of L'Aquila in 2009, killing more than 300 people.

The most deadly temblor since the start of the 20th century came in 1908, when an earthquake followed by a tsunami killed an estimated 80,000 people in the southern regions of Reggio Calabria and Sicily.

(Additional reporting by Gabriele Pileri and Roberto Mignucci, Writing by Philip Pullella and Gavin Jones; Editing by Louise Ireland and Peter Cooney)