France says it has recognised the rebel leadership in Libya as the country's legitimate government.
It is the first country to announce it will establish diplomatic relations with the National Libyan Council, which is based in the eastern city of Benghazi.
Italy says it will seek the opinion of other European countries before making a decision about its stance on the rebel leadership.
Meanwhile, NATO and the European Union are holding talks on a possible no-fly zone over Libya, after some of the fiercest fighting of the three-week-old uprising against Muammar Gaddafi.
A Libyan insurgent says rebels have retaken the heart of Zawiyah, the closest city to Colonel Gaddafi's stronghold of Tripoli, from government forces.
Forces loyal to Colonel Gaddafi are continuing to attack rebel held territory, with tanks advancing on the oil town of Ras Lanuf.
The Pentagon said it was preparing a full range of military options for Libya, including a no-fly zone, with the plans to be discussed by NATO ministers at talks in Brussels.
Military officers say a zone could be set up quickly.
Rebel forces have appealed to Washington and its allies to impose a no-fly zone to deny government forces the advantage of using warplanes and to prevent Colonel Gaddafi moving troops by helicopter.
Russia has already said it will ban all weapons sales to Libya.
The Kremlin says President Dmitry Medvedev has signed a decree to join United Nations Security Council sanctions against Libya, banning the supply of arms, ammunition and military equipment.
The German economy ministry says it has frozen bank accounts in the country held by the Libyan central bank and the Libyan Investment Authority.