Protesters said they had taken over Misrata, which would be the largest city in the western half in the country to fall into their hands. The military has also moved heavy forces into the town of Sabratha, west of the capital, to try to put down protesters who have overwhelmed security headquarters and government buildings, a news website close to the government reported.
International outrage mounted after Gadhafi on Tuesday went on state TV and in a fist-pounding speech called on his supporters to take to the streets to fight protesters. Gadhafi's retaliation has already been the harshest in the Arab world to the wave of anti-government protests sweeping the Middle East.
Italy's Foreign Minister Franco Frattini said estimates of some 1,000 people killed in the violence in Libya were "credible," although he stressed information about casualties was incomplete. The New York-based Human Rights Watch has put the death toll at nearly 300, according to a partial count.
Gadhafi's speech appeared to have brought out a heavy force of supporters and militiamen that largely prevented major protests in the capital Tuesday night or Wednesday. Through the night, gunfire was heard, said one woman who lives near downtown.
"Mercenaries are everywhere with weapons. You can't open a window or door. Snipers hunt people," she said. "We are under siege, at the mercy of a man who is not a Muslim."
During the day Wednesday, more gunfire was heard near Gadhafi's residence, but in many parts of the city of 2 million residents were venturing out to stores, some residents said. The government sent out text messages urging people to go back to their jobs, aiming to show that life was returning to normal. The residents spoke on condition of anonymity for fear of retaliation.
But Libya's upheaval, just over a week old, has shattered the hold of Gadhafi's regime across much of the country. Protesters claim to hold towns and cities along nearly the entire eastern half of the 1,000-mile Mediterranean coastline, from the Egyptian border. In parts, they have set up their own jury-rigged self-administrations.
At the Egyptian border, guards had fled, and local tribal elders have formed local committees to take their place. "Welcome to the new Libya," a graffiti spray-painted at the crossing proclaimed. Fawzy Ignashy, a former soldier, now in civilian clothes at the border, said that early in the protests, some commanders ordered troops to fire on protesters, but then tribal leaders stepped in and ordered them to stop.
"They did because they were from here. So the officers fled," he said.
A defence committee of local residents was even guarding one of Gadhafi's once highly secretive anti-aircraft missile bases outside the city of Tobruk. "This is the first time I've seen missiles like these up close," admitted Abdelsalam al-Gedani, one of the guards, dressed in an overcoat and carrying a Kalashnikov automatic rifle.
Protesters have claimed control all the way to the city of Ajdabiya, about 480 miles (800 kilometres) east of Tripoli, encroaching on the key oil fields around the Gulf of Sidra.
That has left Gadhafi's power centred around Tripoli, in the far west and parts of the country's centre. But that appeared to be weakening in parts.
Protesters in Misrata were claiming victory after several days of fighting with Gadhafi loyalists in the city, about 120 miles (200 kilometres) east of Tripoli.
Residents were honking horns in celebration and raising the pre-Gadhafi flags of the Libyan monarchy, said Faraj al-Misrati, a local doctor. He said six people had been killed and 200 wounded in clashes that began Feb. 18 and eventually drove out pro-Gadhafi militiamen.
Residents had formed committees to clean the streets, protect the city and treat the injured, he said. "The solidarity among the people here is amazing, even the disabled are helping out."
An audio statement posted on the Internet was reportedly from armed forces officers in Misrata proclaiming "our total support" for the protesters.
New videos posted by Libya's opposition on Facebook also showed scores of anti-government protesters raising the flag from the pre-Gadhafi monarchy on a building in Zawiya, 30 miles (50 kilometres) west of Tripoli. Another showed protesters lining up cement blocks and setting tires ablaze to fortify positions on a square inside the capital.
The footage couldn't be independently confirmed.
Further west, armed forces deployed in Sabratha, a town famed for nearby ancient Roman ruins, in a bid to regain control after protesters burned government buildings and police stations, the Quryna news website reported. It said clashes had erupted between soldiers and residents in the past nights and that residents were also reporting an influx of pro-Gadhafi militias that have led heaviest crackdown on protesters.
The division of the country — and defection of some army units to the protesters — raises the possibility the opposition could try an assault on the capital. On the Internet, there were calls by protesters for all policemen, armed forces and youth to march to Tripoli on Friday.
In his speech Tuesday night, Gadhafi defiantly vowed to fight to his "last drop of blood" and roared at supporters to strike back against Libyan protesters to defend his embattled regime.
"You men and women who love Gadhafi ... get out of your homes and fill the streets," Gadhafi said. "Leave your homes and attack them in their lairs."
Gadhafi appears to have lost the support of several tribes and his own diplomats, including Libya's ambassador in Washington, Ali Adjali, and deputy U.N. Ambassador Ibrahim Dabbashi.
The Libyan Embassy in Austria also condemned the use of "excessive violence against peaceful demonstrators" and said in a statement Wednesday that it was representing the Libyan people.
International alarm has risen over the crisis, which sent oil prices soaring to the highest level in more than two years on Tuesday and sparked a scramble by European and other countries to get their citizens out of the North African nation. The U.N. Security Council held an emergency meeting that ended with a statement condemning the crackdown, expressing "grave concern" and calling for an "immediate end to the violence" and steps to address the legitimate demands of the Libyan people.
French President Nicolas Sarkozy also pressed Wednesday for European Union sanctions against Libya's regime because of its violent crackdown on protesters, and raised the possibility of cutting all economic and business ties between the EU and the North African nation.
"The continuing brutal and bloody repression against the Libyan civilian population is revolting," Sarkozy said in a statement. "The international community cannot remain a spectator to these massive violations of human rights."
Italian news reports have said witnesses and hospital sources in Libya are estimating there are 1,000 dead in Tripoli, the Libyan capital, alone.
"We have no complete information about the number of people who have died," Frattini said in a speech to a Catholic organization in Rome ahead of a briefing in Parliament on Libya. "We believe that the estimates of about 1,000 are credible."
Libya is the biggest supplier of oil to Italy, which has extensive energy, construction and other business interests in the north African country and decades of strong ties.
Frattini said the Italian government is asking that the "horrible bloodshed" cease immediately.