Libyan interim government forces have made a tactical retreat after mounting attacks on Muammar Gaddafi's home town of Sirte, getting as close as half a kilometre from the centre of the former leader's coastal stronghold.
Pick-up vehicles mounted with machine guns and loaded with National Transitional Council (NTC) fighters had raced into the town's centre, backed up by NATO jets, on Saturday.
Gunfire could be heard coming from central Sirte and black smoke rose as NTC forces massed in Zafran Square and moved up tanks and mortars.
Field medics said two NTC soldiers had been killed and more than 20 wounded in the fighting against pro-Gaddafi forces on Saturday.
"They have snipers above the mosques, above the buildings. They're using the houses and public buildings," NTC fighter El-Tohamy Abuzein told Reuters from his position in Zafran Square. The NTC assault plan has divided Sirte into three zones.
"They took area number one and they are fighting in area number two and they are holding there until morning," NTC commander Fathi Bafhaaga said.
Journalists at the scene said it was the deepest NTC fighters had got into Sirte, but it was not possible to verify whether the NTC was holding onto its gains overnight.
Taking Sirte would be a huge boost for the NTC as it tries to establish credibility as a government, and a devastating blow for Gaddafi, widely believed to be on the run inside Libya.
NATO, whose warplanes played a vital role in the six-month war that toppled Gaddafi, said its planes had hit a number of targets in Sirte in the previous 24 hours, including an ammunition depot and an anti-aircraft gun.
It said in a statement the air attacks had been mounted to protect civilians from Gaddafi forces inside the town.
"Among the reports emerging from Sirte are executions, hostage-taking, and the calculated targeting of individuals, families, and communities within the city," NATO said.
Previously, NTC forces have retreated from Sirte and the other final Gaddafi stronghold, Bani Walid, after poorly organised assaults met fierce resistance from his loyalists.
Though NTC forces have tightened their grip in the past few days on southern oasis towns that sided with Gaddafi, that progress has been overshadowed by unsuccessful efforts to take the last strongholds.
NTC commanders say their advance on Sirte has been hampered by the presence of large numbers of civilians, many of whom have fled in the past week.
A Gaddafi spokesman has accused NATO of killing several hundred civilians in strikes on Sirte. Communications have been largely cut off since the fall of the capital Tripoli last month.
NTC leader Mustafa Abdel Jalil said on Saturday that interim government forces had found suspected internationally banned weapons near the towns of Sabha and Wadan, but he gave no details about them.
"There are weapons believed to be internationally forbidden, and they are under our control," he told a news conference at the NTC's headquarters in its eastern Benghazi base.
"We will seek help from local experts and the international community to get rid of these weapons in a suitable way."
The NTC, the political leadership of the rebel movement that rose up against Gaddafi's 42-year-rule and drove him from power with support from the West and several Arab nations, faces a challenge in trying to impose its authority across Libya.
It said last week it would move to Tripoli only after its forces were in full control of Libyan territory, contradicting an earlier pledge to move the interim administration from Benghazi around mid-September.
NTC premier Mahmoud Jibril told world leaders at the United Nations on Saturday that "a new Libya is coming to life" as a nation committed to democracy, equality and reintegration into the international community.
Jibril said the NTC is committed to drafting a constitution that would be put to the Libyans for a referendum, noting that national unity is impossible without a united land and national reconciliation.
In Benghazi also on Saturday, the head of the NTC has said an interim government will be announced in the coming week.
Mustafa Abdul-Jalil said Libyans must unite to form a new government. The NTC failed to seat a new cabinet last week amid disagreements over which cities should be represented and other issues.
Abdul-Jalil spoke to reporters after returning from New York where he and Jibril represented Libya at the first post-Gaddafi meeting of the UN General Assembly.
Libya's interim rulers will hold an urgent meeting on Sunday to discuss the formation of a "crisis government", signalling a breakthrough in efforts to form a more inclusive administration after the war.
"We've agreed on a number of portfolios and who would hold the most important ones. There will be 22 portfolios and one vice-premier," Abdel Hafiz Ghoga, a spokesman for the NTC, said.
"It will be a compact government, a crisis government."
Earlier this month, Abdul-Jalil, the chief of Libya's revolutionary movement, called for the Libyan people to form a democratic state based on Islamic law.