Muammar Gaddafi’s fighters in Bani Walid have launched artillery strikes and tried to ambush encroaching revolutionary forces at the northern gate of the loyalist stronghold.
Meanwhile, Libya’s new leaders have postponed the unveiling of an interim government.
At a news conference in Benghazi, they said that while some positions have been finalised, negotiations on others are ongoing.
Sunday’s counter-attack came after the two sides clashed through the night inside the town as Libya’s new rulers faced fierce resistance to their efforts to crush the dug-in fighters loyal to the fugitive Gaddafi.
Mortar fire targeted a building where forces aligned with the National Transitional Council (NTC) were taking cover as well as the town’s north entrance, kicking up sand and filling the sky with black smoke.
Anti-Gaddafi fighters returned fire with machine guns and rockets.
Despite the heavy fighting, Ahmed Bani, the interim government’s military spokesman, said on Saturday that it was only a “matter of days” before the two towns are captured.
He also gave army personnel still loyal to Gaddafi a last chance to join the ranks of former rebel fighters.
“The soldiers and officers who will not heed this last call will be accused of high treason,” Bani said in Tripoli.
The integration of former government soldiers will be part of efforts to rebuild the national army in a post-Gaddafi Libya, he added.
The NTC on Sunday said they were delaying final decisions about the make-up of the new government, in which 36 interim cabinet members were expected to be announced.
NTC number two Mahmud Jibril, a former Gaddafi regime official, stands accused by some of his colleagues of failing to consult enough with long-standing grassroots opposition groups such as the Muslim Brotherhood, an NTC official said.
Jibril is expected to retain his post as interim prime minister, while Ali Tarhuni was touted to be named vice president in charge of economic affairs.
The defence portfolio was expected to go to Osama al-Juwili and oil to Abdel Rahman bin Yezza.
“What we know for sure is that it will be 36 people representing different parts of Libya,” Al Jazeera’s Hashem Ahelbarra, reporting from Tripoli, said.
Libyan pilots return home after defecting to Malta
“They would like to ensure a representation that takes into account all different ethnic groups and all different cities.
“We know that they have offered five to six ministries to the Islamists. And there are attempts to combine the prime minister post with the minister of foreign affairs.
“They do understand that the stakes ahead and the challenges facing this post-Gaddafi Libya are going to be incredibly high, and for this they want people who have no affiliations with the Gaddafi time.”
On Sunday, two Libyan fighter jet pilots who had defected to Malta in February returned home.
The men told reporters they were ordered to bomb protesters in Beghazi, but diverted their planes to Malta at the last minute.
Seven months later, they have returned home to a hero’s welcome.
In Sirte, NTC forces swept further into the city on Saturday before retreating under heavy artillery fire after two hours of clashes.
“The situation at the roundabout is pitiful,” Saleb Abu Shaala, the Al-Dhahira brigade commander, said. “There is no central command, we are retreating to regroup and re-enter again from three fronts.”
Abu Shaala said the clashes erupted in mid-morning and that Gaddafi’s forces used heavy artillery and rockets against them.
Doctors at a field hospital reported at least 10 killed and 40 wounded in the fighting in Sirte.
Front-line fighters and commanders gave contrasting reports of progress in Sirte, with men on the ground acknowledging they were facing a tough enemy and those in charge downplaying the pockets of resistance.
Al Jazeera’s Hoda Abdel Hamid, reporting from Ras Lanuf near Sirte, said it had been very difficult for some NTC fighters to get inside the town.
“In the east, they have not been able to even get close to town. The fighters here have heavy weaponry – tanks, heavy artillery – but they are still not able to advance,” she said.