New York-based Human Rights Watch said hundreds of prisoners were killed in Abu Salim prison on June 28 and 29, 1996, after prison security officers reportedly opened fire on inmates who had revolted over poor conditions.
Sarah Leah Whitson, executive director of the Middle East and North Africa division at Human Rights Watch, said the Libyan government had failed to disclose vital information on the tragedy.
"The government must allow an independent investigation into the incident and punish anyone found to have ordered or committed such a horrible crime," she said in a statement released on Thursday.
Libyan leader Muammar al-Qadhafi and other officials have acknowledged that security forces killed some prisoners, but said it was in correct response to the prison revolt.
The head of Libya's Internal Security Agency told Human Rights Watch in May 2005 that the government had opened an investigation into the incident, but it is not clear when or if these findings will be published.
Human Rights Watch said it had interviewed a former prisoner called Hussein al-Shafa'i, who alleged that security forces killed up to 1,200 prisoners and then disposed of the bodies.
The former inmate, now in the US seeking asylum, said the incident began about 4.40pm on June 28, when prisoners in one section of the prison seized a guard named Omar who was bringing their food.
"I was asked by the prison guards to wash the watches that were taken from the bodies of the dead prisoners and were covered in blood"
former prisoner at Abu Salim
Many others later escaped their cells, angered by restricted family visits and poor living conditions, which had deteriorated after some prisoners escaped the previous year, al-Shafa'i said.
After a hostage situation was apparently mediated, security forces entered the prison and divided up the prisoners before a grenade was thrown and the forces opened fire with machine guns, he added.
"I was asked by the prison guards to wash the watches that were taken from the bodies of the dead prisoners and were covered in blood," al-Shafa'i told the rights organisation.
He said he calculated the number of dead by the number of meals he was told to prepare after the incident.
Many of the bodies were then buried in a trench in the facility, but they have since been removed, he said.
The Libyan Human Rights Solidarity, a Libyan rights group based in Switzerland, says that since 2001 the authorities have notified 112 families that a relative held in Abu Salim was dead, without providing the body or details on the cause of death.
An additional 238 families say they have lost contact with a relative who was a prisoner at the facility.