Tanks of forces loyal to the Libyan leader Muammar Gaddafi are closing in on the rebel-held main square of the western town of Zawiyah.
A rebel fighter named Ibrahim told Reuters the pro-Gaddafi forces are in control of the main road and the suburbs of Zawiyah.
He says rebel forces still control the square and the enemy is about 1500 metres away.
Ibrahim says there are army snipers on top of most of the buildings, shooting whomever dared to leave their homes. He says half the city has been destroyed by air attacks.
Gaddafi vows to fight Western plans
Col Gaddafi has said his people will take up arms if a no-fly zone is imposed by Western nations or the United Nations, as many of the rebels have been calling for.
In an interview with Turkish television, he said a no-fly zone would show the true intention was to seize Libya's oil.
NATO has launched 24-hour sea and air surveillance of Libya.
United States President Barack Obama and the British Prime Minister David Cameron have agreed to plan what they call a "full spectrum" of action.
Mr Cameron says the world cannot stand aside while Col Gaddafi does what he calls "terrible things" to the Libyan people.
A no-fly zone would probably ban military flights by government forces through Libyan airspace. Any aircraft violating the exclusion zone would risk being shot down by international forces.
"If they take such a decision [to impose a no-fly zone], it will be useful for Libya, because the Libyan people will see the truth, that what they want is to take control of Libya and to steal their oil," Col Gaddafi said in an interview with Turkish TRT TV.
The Libyan leader also made a speech broadcast on state TV, in which he said European governments and al-Qaeda were trying to divide the country.
A BBC correspondent in Tripoli says the Libyan leader appeared in increasingly confident and belligerent mood. He showed no sign of willingness to compromise or talk to the opposition.
