Muammar Gaddafi's forces launched a fresh artillery bombardment on Zawiyah on Tuesday and surrounded the town in the west of Libya, Al Jazeera reported.
It did not give further details about the attack on the town which has been a focus for heavy fighting between government forces and rebels.
Residents who had been speaking to journalists about developments have not been reachable.
Civilians were surrounded by Gaddafi forces in two western towns, Misrata and Zawiyah, and in the east warplanes hit the rebel-held oil terminal town of Ras Lanuf as strikes and counter-attacks pointed to an increasingly protracted conflict.
Two Arab papers and al Jazeera television said Gaddafi was looking for a pact allowing him to step down, but Libyan government has denied holding talks with rebels, Al Arabiya television reported. Al Arabiya did not give details or a source of its initial report. But it then quoted a Libyan Foreign Ministry spokesman as saying the accusations of the Libyan National Council, an interim body set up by rebels, did not deserve a response.
One of Gaddafi's sons, Saadi, said in an interview with Al Arabiya television his father had not yet thrown his army into full battle against the rebels, saving it to shield Libya against foreign attack and to protect "sensitive sites".
"The tribes are all armed, there are forces from the Libyan army and the eastern region is armed. The situation is not like Tunisia or Egypt," said Saadi. "If something happened to the leader, who would be in control? A civil war would start."
The battlefield in eastern Libya around important oil terminals has become mired in attack and counter-attack between the loose-knit rebel army of young volunteers and defectors and the Libyan armed forces in a buffer zone of barren landscape between the east and the west of Libya.
The largely inexperienced rebels lack the firepower of their rivals. They have no warplanes to back them up and rely mostly on heavy machineguns, anti-aircraft weapons and rocket propelled grenades. They travel by 4x4 pick-up trucks.
But their agility, often fairly chaotic at the front, has given them a degree of protection from Gaddafi's forces, who have proved more effective at quashing the rebellion in the west around the Libyan leader's Tripoli powerbase.
U.N. aid coordinator Valerie Amos said the fighting across Libya meant that more than a million people fleeing or inside the country needed humanitarian aid.
"Humanitarian organisations need urgent access now," she said. "People are injured and dying and need help immediately." The United Nations appealed for $160 million for an operation over the next months to prepare shelter, food and medicine.
Britain and France spearheaded a drive at the United Nations for a no-fly zone over Libya.
The White House pushed back against rising pressure from some U.S. lawmakers for direct intervention in Libya, saying it first wanted to figure out what military options could achieve in this oil-producing desert state which is racked by conflict.
British Foreign Secretary William Hague said London was working with its partners "on elements of a resolution on a no-fly zone, making clear the need for regional support, a clear trigger for such a resolution and an appropriate legal basis".
A French source said France also was working with its U.N. partners on a no-fly zone resolution. Gulf states called for a no-fly zone and an urgent Arab League meeting.
Western allies differ over how a no-fly zone might be implemented. The United States has said it would involve a large-scale military operation, including strikes on Libyan air defences, but some military analysts have said it could be limited to preventing flights in Libyan airspace, without a big preliminary campaign.
U.S. Defense Secretary Robert Gates, in Afghanistan, said action should be taken only with international backing. The White House said all options were on the table, including arming rebels.
Russia, a permanent member of the U.N. Security Council with veto powers, said it opposed foreign military intervention.
NATO has launched 24-hour surveillance of Libya with AWACS reconnaissance aircraft, the U.S. ambassador to NATO said.
In the rebel-held city of Misrata, the wounded were being treated on hospital floors because of a catastrophic shortage of medical facilities in the besieged city, a resident said.
Misrata is the biggest city in the west not under the control of Gaddafi, and its stand against a militia commanded by his own son has turned it into a symbol of defiance.
In the east, warplanes launched strikes on the rebel-held oil town of Ras Lanuf 600 km (400 miles) east of the capital Tripoli. One ripped through a car carrying a family.
Shipping sources said the fighting had closed the Ras Lanuf terminal and the oil port of Brega. Brent crude prices rose above $118 a barrel on Monday before falling back to $115 and U.S. prices pushed to their highest level since September 2008.
Youcef Yousfi, president of the Organisation of Petroleum Exporting Countries, said there were no plans for a crisis meeting of the group and high prices were short term.
The Libyan government says it is fighting against "al Qaeda terrorists" and maintains its security forces have targeted only armed individuals attacking state institutions and depots.
So far tens of thousands of migrant workers have fled but few Libyans.
"If we get a massive outflow of Libyans, this would create a refugee situation, so we appeal to all countries to keep their doors open and be ready to provide assistance as humanitarian law requires," U.N. High Commissioner for Refugees Antonio Guterres said.
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