Entire villages around Nicaragua's Casita volcano have been buried in what is feared to be the country's worst natural disaster since a magnitude- 6.2 earthquake killed 5,000 people in 1972.
Rescue workers aboard the first army helicopters to reach the communities devastated by Mitch found hundreds of decomposing bodies.
One hundred soldiers working at the scene buried the rotting bodies of the victims where they lay because of public health concerns.
About 360 bodies were pulled from the mud in four villages near Posoltega, about 50 miles northwest of the capital, Managua. Only 92 of the estimated 2,000 area residents were found alive, some injured, and the remainder were listed as missing, according to army spokesman Captain Milton Sandoval.
It was unclear last night whether some residents of the villages of El Porvenir, Versalles, Rolando Rodriguez and Santa Narcisa had fled in time to avoid the mudslide or had been asleep in their homes when it struck.
A river of mud and rubble collapsed on the villages on Friday after a crater lake near the volcano's peak overflowed and caused part of the mountain to crumble.
Unconfirmed radio reports said as many as 4,000 people may have died when mudslides struck in the northwestern province of Chinandega.
By official count, 225 people have been killed in Nicaragua alone from the heavy rain and flash flooding - apparently in addition to the 360 dead in Posoltega - for a total of 585. Another 253 people were listed as missing, the National Civil Defense reported.
A woman who claimed to have survived the disaster told Radio Nicaragua yesterday she had seen "many unburied bodies" in orchards near to the volcano. Mercedes Rodriguez Zapata claimed to have left the area on Saturday and travelled on foot and horseback to Managua.
The hurricane directly killed 977 people in Central America.
When the winds dropped off Honduras and Belize and the hurricane was reduced to what weathermen call a "tropical storm", residents spoke of a miracle. But then the rains came.
Red Cross workers compared the scene to the Colombian town of Armero, which was wiped out in 1985 when a volcanic eruption melted snow and sent a wall of mud into the town. At least 23,000 people were buried alive.
Mitch, the fourth most powerful Atlantic hurricane of the century with furious 295kph winds, had late yesterday moved on into Guatemala to the northwest, where, according to the US National Hurricane Centre, it was finally dying out.
Yesterday, France said it was sending a 23-man rescue team to work in Nicaragua, Honduras, El Salvador and Guatemala.
It will also send tents, medicine and food.
Nicaragua's roads are poor and the army normally uses helicopters to get around, but Mitch's rains kept them grounded until last night.
To the north of Nicaragua, the Honduran capital, Tegucigalpa, built on a chain of hills and valleys, was largely under water yesterday.
Many people complained that they had received no warning of the flood from the authorities despite the fact that Mitch had been off the coast for more than a week.
Guatemala and the former British colony of Belize, much of which is at sea level, were also badly pounded, with floodwaters causing extensive damage to Belize's vital banana industry.
US Coast Guard cutters braved surging seas in search of a tourist schooner, the Fantome, which disappeared off Belize last week.
The 258ft schooner, run by Windjammer Barefoot Cruises, was carrying a crew of about 20. It dropped off its passengers, believed to number a couple of hundred, in Belize a week ago, when Mitch was threatening to turn into a major hurricane.
The crew was trying to find a haven further north but so far it has not arrived.