As the UN Human Rights Council met in Geneva over a deadly crackdown by Gaddafi's forces on anti-regime protests and the ensuing humanitarian crisis, the International Criminal Court said it would probe possible crimes against humanity committed in Libya.
The European Union said it was making contact with Libyans seeking to overthrow Gaddafi's regime, a day after Washington said it was ready to assist the pro-democracy protesters who have overrun key cities and now control vast swathes of the oil-rich North African state.
Diplomatic sources in Brussels said the EU on Monday agreed to slap an assets freeze and travel ban on Gaddafi and 25 members of his family and inner circle, following similar measures announced at the weekend by the UN Security Council.
Faced with the threat of massacres or a wave of refugees on their Mediterranean flank, senior Western officials, including France's Prime Minister Francois Fillon, were Monday weighing military options.
"We're studying all options to ensure that Colonel Kadhafi understands that he has to go. I know that people have mentioned military solutions, and these solutions are being examined by the French government," Fillon said in an interview with RTL radio.
One option on the table was using NATO air power to impose a no-fly zone over Libya to stop Gaddafi from using air strikes against his own people. However, such a step would require UN approval, experts said.
The unrest that erupted in Libya nearly two weeks ago has killed at least 1,000 people and set off a "humanitarian emergency", the UN refugee agency UNHCR said, as almost 100,000 migrant workers fled the North African state.
Washington said it was ready to assist Gaddafi's opponents, who on Sunday set up a transitional "national council" in several eastern and western cities seized from the regime and called on the army to help them take Tripoli.
US Secretary of State Hillary Clinton echoed the calls of world leaders, including President Barack Obama and British Prime Minister David Cameron, for him to step down. "We are just at the beginning of what will follow Gaddafi," she said.
"First we have to see the end of his regime and with no further bloodshed," she said, noting Washington was eager for his ouster "as soon as possible."
"We want him to leave."
Gaddafi's crumbling regime now controls only some western areas around the capital and a few long-time bastions in the arid south, reporters and witnesses say.
Fighting flared Monday in Misrata, 200 km (125 miles) east of the Libyan capital, where according to residents who have overrun the city an attack by pro-government forces was thwarted and a helicopter hit by anti-aircraft fire.
"The helicopter fired three rockets at the transmission tower of Radio Misrata," said a spokesman for the opposition, reached by telephone.
"It was hit by anti-aircraft fire in a counter-attack," he added, without being able to confirm reports that the aircraft was brought down.
He added however that pro-Gaddafi forces had opened fire randomly on cars and buildings, causing at least one death and several injuries.
An AFP reporter in Nalut, a town of 66,000 people, 235 kilometres (145 miles) west of Tripoli, said that Gaddafi loyalists have entirely disappeared.
"The towns of Rhibat, Kabaw, Jado, Rogban, Zentan, Yefren, Kekla, Gherien and Hawamed have also been free for days. In all these towns, Gaddafi's forces have gone and a revolutionary committee put in place," Shaban Abu Sitta, a local lawyer and member of a revolutionary committee, told AFP.
Regime opponents appeared to control the city of Az-Zawiyah, 50 kilometres (30 miles) west of the capital, where thousands took to the streets to denounce the teetering leader in front of invited journalists.
London said it had frozen Gaddafi family assets in Britain, amid newspaper reports these amount to about 20 billion pounds (32 billion dollars, 23 billion euros) in liquid assets, mostly in London.
A community organiser, Abdel Hafiz Ghoqa, told reporters in Benghazi on Sunday that a transitional "national council" had been set up in cities seized from the regime. "The creation of a national council has been announced in all freed cities of Libya," he said.
The council is the "face of Libya in the transitional period," he said, adding consultations were under way on the body's composition and duties.
On Saturday, former justice minister Mustafa Abdel Jalil, who quit Gaddafi's regime on February 21, said a transitional government would lead Libya for three months, before an election.
The strongman has dismissed the UN sanctions as invalid and said calm had returned to Libya as the territories held by the opposition were "surrounded."
In a telephone statement to Serbian television, he said: "Libya is completely quiet. There is nothing unusual. There is no unrest."
Of the territory held by the opposition, Gaddafi said: "There is a small group (of opponents) that is surrounded, but we will sort that out."
A video posted on the YouTube website meanwhile showed one of Gaddafi's sons, Seif al-Islam, armed with an automatic rifle and urging on supporters of his father. "People say that the police fled, the police joined the agitators. Today we are showing them that the police are with Libya," the son said in the undated video.
As the crisis drove oil prices up to $113.98 per barrel in Asian trading on Monday, the UN refugee agency said a "humanitarian emergency" was underway as thousands of foreigners sought to flee Libya by land, sea and air.
Nearly 100,000 people, most of them Egyptian and Tunisian workers, have already left Libya, while China says it has evacuated nearly 29,000 of its citizens from the strife-torn country.