A large convoy of Libyan armoured vehicles has crossed into Niger, according to the Reuters news agency.
French and Niger military sources told the agency that the convoy, escorted by the Niger army, arrived in the northern desert town of Agadez on Monday.
The convoy contained between 200 and 250 military vehicles and included officers from Libya's southern army battalions, and likely crossed from Libya into Algeria before entering Niger, the sources said.
The Niger military source said many more Libyans, including pro-Gaddafi Tuareg fighters, had also crossed the border into the country seeking refuge.
The French military source said he had been told Muammar Gaddafi and his son Saif al-Islam might be considering joining the convoy en route to Burkina Faso, a landlocked West African state which has offered Gaddafi and his family asylum and has a border with Niger.
Niger's harbouring of wanted Gaddafi-regime officials is "a breach of the United Nations travel [restrictions] for most of these people", Aly Abuzaakouk, executive director of Libya Human and Political Development Forum, told Al Jazeera.
He said Niger should "not side with the enemy of the Libyan people".
The head of Gaddafi's security brigades, Mansour Dhao, along with more than 10 other Libyans, crossed into Niger on Sunday, two Niger officials said earlier on Monday.
Dhao's departure comes days after Gaddafi's wife and three of his children fled to Algeria and fighters for the National Transitional Council [NTC] arrested his foreign minister outside Tripoli.
The French military source said he had been told the commander of Libya's southern forces, General Ali Khana, may also be in Niger, not far from the Libyan border.
He said he had been told that Gaddafi and his son Saif would join Khana and catch up with the convoy should they choose to accept Burkina Faso's offer of exile.
Burkina Faso, a former recipient of large amounts of Libyan aid, offered Gaddafi exile about two weeks ago but has also recognised the NTC as Libya's government.
Yipene Djibril Bassolet, the country's foreign minister, said that Gaddafi could go into exile in his country even though it is a signatory of the International Criminal Court, which has charged him with crimes against humanity.
Mansour El Kikhia, chair of the political science department at the University of Texas, told Al Jazeera: "What is bothersome to me more than anything else is that Gaddafi is aided by some of Tuareg supporters."
"Gaddafi is going to cause mischief, and it is now imperative that the council [NTC] prepares for these contingencies."
Gaddafi has said he is ready to fight to the death on Libyan soil, although there have been a number of reports that he might seek refuge in an African nation.
As for the toppled leader, he is reportedly still in Libya. His spokesman Moussa Ibrahim said that Gaddafi "is in a place that will not be reached by those fractious groups, and he is in Libya."
Gaddafi is in good health and in good spirits, Ibrahim said in remarks broadcast on Monday. He said Gaddafi's son, Saif al-Islam, was also in Libya, moving around from one place to another.
Reports about the convoy entering Niger came as negotiations over the surrender of Gaddafi's stronghold, Bani Walid, appeared to have failed and an attack on the town seemed likely.
Two deadlines have passed and thousands of NTC fighters have massed outside the town, about 150km southeast of the Libyan capital, Tripoli.
Mansour El Kikhia tells Al Jazeera about the implications if Gaddafi was in the convoy
Al Jazeera's Andrew Simmons, reporting from near the town, spoke to some of those who have tried to seal a deal with the Gaddafi loyalists inside.
"They say they want to go step by step, and negotiate with the various tribes around Bani Walid before moving in. They want to end this peacefully," he said.
"But the chances of this happening remain unclear, as Gaddafi forces remain inside the town. They have many civilians around them."
The message varies widely from negotiator to negotiator, with some sounding more optimistic than others.
At a military checkpoint about 60km north of the town on the road to the capital, Abdallah Kanshil, who is conducting talks for the interim government, said a peaceful handover of Bani Walid was imminent.
A day earlier, he had said peace talks broke down after Gaddafi loyalists insisted the fighters put down their weapons before entering Bani Walid.
But on Monday, Kanshil said: "The surrender of the city is imminent. It is a matter of avoiding civilian casualties. Some snipers have surrendered their weapons ... Our forces are ready."
Similar statements have been made for days, however. In any case, 20km closer to Bani Walid, NTC forces have built a field hospital and installed 10 volunteer doctors to prepare for the possibility that Gaddafi loyalists will not give up without a fight.
Reporting from near Bani Walid earlier on Monday, Al Jazeera's Sue Turton said: "Fighters pushed to within seven kilometres of the centre of the town and exchanged fire with some of Gaddafi's forces.
"But they have since retreated a little bit instead of setting up a defensive position there."
Negotiations also continued for the surrender of Sirte, Gaddafi's hometown in the east of the country.
UK to examine spy ties
Against this backdrop of continued conflict, David Cameron, the British prime minister, said an inquiry into his country's pursuit of terrorism suspects will examine new allegations about cozy ties between UK intelligence officials and the Gaddafi regime.
Security documents discovered after the fall of Tripoli have offered embarrassing examples of the warm relationships that British and American spies had developed with their Libyan counterparts.
Files discovered among tens of thousands of papers collected from an External Security building in Tripoli show how Abdel-Hakim Belhaj, now Libya's rebel military commander, was targeted for rendition.
Belhaj, who was seized in Bangkok in 2004 and delivered to Tripoli, alleges that US and British intelligence planned his capture and were later involved in his interrogation.
Cameron said his country's special representative to Libya was moving to Tripoli on Monday to re-establish full diplomatic presence.
"Today the UK's Special Representative [John Jenkins] is deploying to Tripoli to re-establish our full diplomatic
presence," he told parliament.
He said Britain and its NATO allies would continue to implement UN Security Council resolutions for as long as they were needed to protect civilians. Britain was ready to extend the NATO mandate for as long as necessary, he said.
"We will not let up until the job is done," he said.
In another development, media reports on Monday suggested that Chinese arms firms had offered to sell weapons worth about $200m to Gaddafi's forces in July. While China's foreign ministry acknowledged that talks had taken place, it denied prior knowledge.