The Libyan army imposed a no fly zone over Benghazi Saturday in a direct challenge to a retired general who has been using airpower to press a campaign against Islamist militants there.
Khalifa Haftar, who lived in exile in the United States before returning home to lead ground forces in the 2011 NATO-backed uprising that toppled Moamer Kadhafi, heads what he calls a "National Army".
On Friday his paramilitary force, backed by warplanes and helicopters, pounded Islamist militiamen in Libya's second city and fought pitched battles with the ex-rebels.
Prime Minister Abdullah al-Thani denounced Haftar's forces as "outlaws" and called on all parties to observe restraint.
But Haftar vowed to press his war against Islamists, blamed for attacks that have killed dozens of members of the security forces, judges and foreigners since the end of the uprising in October 2011.
"The operation will continue until Benghazi is purged of terrorists," he told Libya Awalan television.
Armed forces chief of staff Abdessalam Hadallah al-Salihin has denied any army involvement in the Benghazi clashes, although he admitted that some officers and army units had defected to join Haftar.
Later Haftar spokesman Colonel Mohammad Hijazi called on people living in the western Benghazi district of Guwersha and the southern one of Sidi Fradj to evacuate their homes.
He did not say if this was the prelude to attacks on those neighbourhoods, which are known to be bastions of the Islamists.
The army's high command upped the ante by declaring all of Benghazi and its suburbs a "no fly zone until further notice," state-run Lana news agency said.
"All military planes flying over the city will be shot down by army units... and units of the revolutionaries (ex-rebels)," it said.
But it was not clear if the army has the means to carry out its threat, which came as local sources said mediation was underway to try and prevent new fighting in Benghazi.
The health ministry said 37 people were killed and 139 wounded in Friday's clashes in Benghazi, cradle of the revolution that toppled and killed Kadhafi.
A precarious calm reigned in the port city Saturday.
Friday's violence came weeks after the government acknowledged for the first time the existence of "terrorist groups" in Libya and said it was mobilising against them.
It also comes two weeks after jihadist gunmen, including Ansar Sharia, stormed police headquarters in Benghazi, triggering fighting that killed nine soldiers.
Haftar's forces pounded former rebel groups, focusing in particular on Ansar Sharia, an organisation designated by the United States as a terrorist group, the army said.
The offensive also comes at a time of high political tensions in Libya where Islamists and liberals are in a tug-of-war, particularly after the disputed election this month of a new Islamist-backed prime minister.
The government has struggled to assert its control over the vast, mostly desert country, which is awash with heavy weapons and effectively ruled by a patchwork of former rebel militias.
The Benghazi clashes have divided Libyans, with some saying Haftar's operation could pave the way to a military coup in order to seize power.
Others praise his will to rid Libya of extremism.
Tribes and the military have allied themselves with Haftar's forces, who are also supported by separatist rebels who have been blockading for months petroleum sites.
Haftar defected from Gaddafi's forces in the late 1980s and spent nearly 20 years in the United States before returning home to join the uprising. He has been accused of being in the pay of the Americans.
In other developments, voting was underway in Tripoli Saturday for local councils to replace those formed after the uprising, with an average turnout at polling stations after a lacklustre campaign.
The city has been divided administratively into four municipalities as part of an electoral process that began last November in the east of the country.
Libya's interim government has divided the country into 102 municipalities with a view to promoting local governance and decentralisation.