Negotiations for the surrender of Muammar Gaddafi's forces in the Libyan town of Bani Walid have failed and will not resume, an official said, opening the way for a military attack.
"I am leaving the military commander to resolve the problem," said Abdullah Kenshil, the chief negotiator for Libya's new government, the National Transitional Council (NTC).
The town southeast of Tripoli is one of the last strongholds of pro-Gaddafi fighters where at least one of the ousted despot's sons is reported to be hiding.
Kenshil said the fighters had wanted to come out with their weapons on Sunday but were rebuffed.
"They demanded that the revolutionaries enter Bani Walid without their weapons," he added, charging that it was a pretext for an ambush.
Kenshil said Gaddafi himself, his sons and much of his family had been in Bani Walid, without specifying when. Some had left but two of Gaddafi's sons, Saadi and Mutassim, were still believed to be there.
Negotiations began several days ago through tribal intermediaries with the hope of taking Bani Walid without bloodshed.
Saadi Gaddafi said the talks' failure was the fault of his high-profile brother Seif al-Islam, who is wanted by the International Criminal Court along with their father for suspected crimes against humanity during the uprising.
Saadi told CNN in a telephone interview that an "aggressive" speech broadcast by his brother a few days ago had led to the breakdown of the negotiations.
Asked about his location, Saadi said he was "a little bit outside" of Bani Walid but had been moving around, CNN reported late on Sunday. He said he had not seen his father or brother for two months.
Saadi said he is "neutral" but remains "ready to help negotiate a ceasefire," CNN added.
Meanwhile NTC military spokesman Ahmed Omar Bani confirmed earlier reports of the death of another Gaddafi son -- Khamis -- and said that the son of the strongman's spy master Abdullah Senussi was also killed.
"I can confirm that Khamis and Mohammed (Senussi) both of them (were) killed around Tarhuna," he told reporters in Benghazi, referring to a town north of Bani Walid on the road from the capital.
Khamis, 28, the youngest son of Gaddafi, commanded a brigade seen as the most effective and loyal force of the Libyan leader. Rebel fighters captured its base south of Tripoli in fierce fighting last week.
Bani Walid is the heartland of the powerful Warfalla tribe, which made up the core of Gaddafi's army and was given top political positions within the regime.
But it has split over whether to back Gaddafi or not, said tribesmen who have sided with the NTC and are among the NTC forces besieging the town.
The anti-Gaddafi fighters had moved to within 15 to 20 kilometres (10 to 12 miles) of Bani Walid in readiness to launch an assault in the event that talks broke down.
They had set a deadline of 0800 GMT Sunday for the town's surrender, although the NTC last week announced an overall truce until September 10 in a bid to negotiate the surrender of the remaining strongholds of Gaddafi forces.
Those include a strip of Mediterranean coast around his hometown of Sirte and the southern oases of Sabha and Al-Jufra as well as Bani Walid.
Civilians fleeing Bani Walid said most of Gaddafi's forces had now fled, taking their heavy weaponry with them into the surrounding mountains.
China offered huge stockpiles of arms to Gaddafi during the final months of his regime and held secret talks on shipping them through Algeria and South Africa, The Globe and Mail reported.
State-controlled Chinese arms companies were ready to sell weapons and ammunition worth at least $200 million (141 million euros) to Gaddafi in late July, despite UN sanctions, the Canadian daily said, citing secret documents it had obtained.
The papers do not confirm whether any military assistance was actually delivered, but senior NTC members said they reinforced their suspicions about the recent actions of China, Algeria and South Africa, the report said
The head of the NTC's military council Omar Hariri reviewed the documents and concluded they explained the presence of new weapons on the battlefield, The Globe and Mail said.
"I’m almost certain that these guns arrived and were used against our people," Hariri said.
Interim defence minister Jallal Dghaili arrived in Tripoli from Benghazi on Sunday with a large following as the NTC gradually transfers from its eastern base to the capital.
Anwar al-Feitiri, interim communications and transport minister, told AFP there are now regular connections between the two cities, although every flight requires NATO permission due to an air embargo that is still in force.
Meanwhile, a senior Libyan rebel commander on Monday demanded an apology from Britain and the US after seized documents suggested both countries were complicit in a plan that led to his detention and torture.
Files unearthed from Gaddafi's intelligence archives documented the capture by the CIA of Abdelhakim Belhaj in Bangkok in 2004 and his forcible repatriation to Libya, where he had fought the old regime.
He was then jailed in Tripoli's notorious Abu Selim prison for seven years and maintains he was questioned by British intelligence officers during his captivity.
Belhaj, now military commander of Tripoli, told the BBC: "What happened to me was illegal and deserves an apology."
Britain's Guardian newspaper on Monday quoted him as saying he was considering suing both governments.
"I was injected with something, hung from a wall by my arms and legs and put in a container surrounded by ice," he said of his time in prison. "They did not let me sleep and there was noise all the time. I was regularly tortured.
"I'm surprised that the British got involved in what was a very painful period in my life," he added.