Street battles are raging in one of the last remaining Gaddafi strongholds in Libya, Bani Walid, which rebels say is close to capture.
As the world's police body, Interpol, put out a top-level alert for Libyan leader Muammar al-Gaddafi, fierce fighting was underway for the town, 90 miles southeast of Tripoli.
The heaviest fighting in Libya for days broke out overnight in the town of Bani Walid after prolonged efforts at negotiation with loyal forces failed, Sky News reported.
Rocket, mortar and tank fire have also been exchanged outside Sirte, Gaddafi's home town, 450km east of Tripoli, according to witnesses.
Commanders said they had cleared outlying areas and were within a few miles of the center of Bani Walid, BBC reports.
The rebels' Transitional National Council had set a deadline today Saturday for towns still loyal to Gaddafi to surrender, and negotiations have been on and off over Bani Walid, where several regime officials, including Gaddafi's spokesman Moussa Ibrahim, are believed to be holed up, AFP reported.
Abdullah Kenshil, the opposition fighters' chief negotiator, said the attack on Bani Walid, 150km southeast of Tripoli, was provoked by Gaddafi forces firing rockets at former rebel fighters in the area, AAP reports.
The fierce clashes followed the issuing of arrest warrants for Gaddafi, his son Saif al Islam and his spy chief, Abdullah al Senussi, by Interpol.
The "request for Interpol Red Notices will significantly restrict the ability of all three men to cross international borders and is a powerful tool to help in their location and arrest," Interpol chief Ronald Noble said.
Surt and Bani Walid are two of only four communities still under the control of forces loyal to Gaddafi.
Rebel officials said they opened the campaign on Bani Walid early after peace negotiations failed and loyalist forces opened fire on rebel positions, The New York Times reports.
The two sides were said to be fighting outside the city and in close-quarters, street-to-street fighting inside, The Associated Press reported, citing rebel officials. “Snipers are scattered over the hills and the rebels want to chase them,” a rebel spokesman told The A.P.
“There is hand-to-hand combat. The population is afraid so we have to go and protect civilians.”