Libyan interim government forces who have surrounded the Gaddafi-held desert town of Bani Walid say their talks with the loyalist side have failed.
One key anti-Gaddafi negotiator said civilians in the town could not move and he feared they may be shot in revenge or used as human shields.
He said that pro-Gaddafi forces had demanded his fighters enter the town unarmed.
He added he had now handed over the matter to military commanders.
The interim government also says it is now sure Col Gaddafi's son, Khamis, has been killed.
The National Transitional Council (NTC) said he had died in fighting close to Tripoli and was buried near Bani Walid. Muhammad, the son of former spy chief Abdullah Senussi, was also killed, it said.
No further details of the deaths were provided and Khamis's death has been reported on at least two other occasions during the uprising.
Bani Walid, 150km (95 miles) south-east of Tripoli, is one of four towns and cities - the others are Jufra, Sabha and Col Gaddafi's birthplace in Sirte - that are still controlled by Gaddafi forces.
NTC chairman Mustafa Abdel Jalil said the pro-Gaddafi bastions were being given humanitarian aid and time to surrender "to avoid further bloodshed".
Family members
Anti-Gaddafi fighters have moved on Bani Walid from three sides.
The negotiator, Abdullah Kenchil, said talks with the Gaddafi side had failed and would not resume, adding: "I am leaving the military commander to resolve the problem."
He said the loyalists had wanted the anti-Gaddafi forces to enter the town unarmed.
Some reports say negotiations will continue within the town, among tribal elders, and that a military attack is not necessarily imminent.
Saadi Gaddafi, one of Col Gaddafi's sons, has blamed his brother Saif al-Islam for the breakdown in talks.
Saif al-Islam's "aggressive" speech a few days ago had spoilt the chances for dialogue, Saadi Gaddafi told CNN.
Saadi told the US network he was "a little bit outside" Bani Walid.
Earlier, Mr Kenchil told the BBC's Ian Pannell there were two colonels and other forces in Bani Walid that remained a threat.
He said negotiators had tried to persuade them to lay down their arms, not because of their military strength but because of the danger to civilians.
Mr Kenchil said: "We don't want anything to happen to anyone in Bani Walid. We want to go in peacefully and people will be safe, because otherwise they could be taken as human shields or face revenge if they don't support [the pro-Gaddafi forces]."
He added: "People cannot even move to the market. We are advising people not to enter or leave the town."
Mr Kenchil said pro-Gaddafi military officers had been seeking assurances - and had been given them - that they would receive fair treatment and trial for alleged abuses during the uprising if they laid down their weapons.
The NTC in Benghazi said no negotiations were now ongoing as there was no good faith from the Gaddafi side.
An NTC spokesman said anti-Gaddafi elements had risen up in Bani Walid to take over some parts of the enclave and that he hoped the rest would fall in the coming hours.
Mr Kenchil said intelligence sources had told him Saif al-Islam had left Bani Walid only on Saturday, heading to an unknown destination further south, but there was no information of another son, Mutassim.
Analysts say it is important for the new national army to consolidate its control of all of the country to allow it to form a meaningful new government and to remove the threat from the old regime.
Bani Walid is a stronghold for the Warfalla tribe.
In a defiant audio message on 1 September, Col Gaddafi referred to it as "an armed fortress".
His whereabouts remain unconfirmed; his spokesman Moussa Ibrahim told Reuters in a telephone interview that the ousted leader was somewhere in Libya, safely surrounded by loyal supporters.
On Sunday there were fresh statements from the NTC that it knew Col Gaddafi's whereabouts, but no location has been identified.
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| The Warfalla tribe is powerful in Bani Walid. |
Tension
Meanwhile, the NTC is stepping up its efforts at reconstruction, setting up a supreme security council to protect Tripoli.
The NTC said on Sunday it had also now taken full control of the man-made river south of Tripoli and that it hoped to have the water supply for the capital back soon.
The UN secretary general's special adviser, Ian Martin, who is visiting Tripoli, told the BBC the Libyans faced a number of challenges.
He said these included making an early start on preparing for free and fair elections, and setting up a justice system that struck a balance between accountability for human rights abuses and the promotion of reconciliation.
Mr Martin also said Libya needed help to build a police force that was democratically accountable and protected rights rather than oppressing them.
But in a sign of tension over the new government of Libya, a key Islamist military commander who helped defend Benghazi has called on all of the NTC heads to resign.
Ismail al-Salabi told Reuters: "The role of the executive committee is no longer required because they are remnants of the old regime. They should all resign, starting from the head of the pyramid all the way down."
(Source - BBC)
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