Tripoli: Libya`s National Transitional Council (NTC) said a new transitional government would be formed within 10 days as fighters backing the new regime clashed with forces loyal to Muammar Gaddafi.
Mahmud Jibril, deputy head of the NTC said forces were still "in the process of liberating Libya, and revolutionary combatants are still on the fronts”.
Another government would be formed once "Libya is liberated", he added.
In Bali Walid, a correspondent said at least three fighters were killed and 15 wounded in skirmishes on the outskirts of the town.
Forces loyal to Libya`s new rulers have gathered there awaiting the signal to storm the oasis town.
NTC interim leader Mustafa Abdel Jalil on Saturday gave the green light to attack Bani Walid southeast of Tripoli, Gaddafi`s hometown Sirte to the east and Sabha in the deep south. The deadline for pro-Gaddafi enclaves to surrender had passed, he said.
The whereabouts of Muammar Gaddafi remain a mystery but in Niger, government spokesman and Justice Minister Marou Amadou announced that Saadi Gaddafi had arrived there on Sunday.
Saadi, 38, is the third of Gaddafi`s seven sons, a playboy who renounced a football career in 2004 to join the Army, where he led an elite unit.
Niamey has insisted that Muammar Gaddafi is not on Niger’s soil.
Streams of NTC fighters backed by armoured vehicles mounted with anti-aircraft guns arrived on Sunday and took up positions around Bani Walid, 180 kilometres (110 miles) from Tripoli, a correspondent said.
The fighters said they had routed Gaddafi loyalists and snipers from Wadidinar, a valley in the shadow of Bani Walid, during their advance on the town.
Clashes erupted in the afternoon in the neighbourhoods of Al-Mansila and Al-Hawasim, according to fighter Ahmed al-Warfalli, but military commanders insisted that the main assault had yet to begin.
"Today we are still on standby and waiting for orders," said one commander, General Atiya Ali Tarhuni.
All afternoon, a pro-Gaddafi radio station broadcast an appeal to residents to rally against the attackers.
"They want to spread corruption and destruction everywhere," said the broadcast.
"Go today, today, today -- now you are armed there is no excuse. This is the time for jihad (holy warfare)."
By evening, ambulances were rushing to and from the front line, and a reporter counted three fighters killed and 15 wounded. Rebel fighters said they had lost as many as 10 men.
Skirmishes on Friday night saw four NTC fighters killed and 26 wounded.
An emergency services doctor operating a field clinic in the hamlet of Wishtata, 40 kilometres (25 miles) from Bani Walid, said most of the wounded were being treated for sniper shots and explosions.
"There are Gaddafi military people in the heights of Bani Walid shooting down at rebels," said Dr Mehdi Barut.
A pick-up truck arrived with four men the fighters said were pro-Gaddafi prisoners. They were locked in a room at the clinic, away from the angry crowd that had gathered as news of their arrival spread.
Sami Saadi Abu Rweis, a fighter returning from Bani Walid, reported snipers everywhere.
"They are shooting at us from two kilometres away. Bani Walid is full of arms -- every household has them.
"There is some type of treason going on. People pretended to be with the rebels but are really with Gaddafi."
Another correspondent said that west of Sirte, around 200 pick-ups with mounted light artillery had gathered before dawn in the desert and began moving south, cutting through villages to the west and southwest, meeting no resistance.
Armed with Katyusha and Grad rockets, anti-aircraft guns and heavy machine guns, they ripped down pro-Gaddafi flags en route, and were met by villagers flashing victory signs and shouting "Allahu Akbar (God is greatest)."
NTC leader Abdel Jalil arrived on Saturday to a red-carpet welcome at Tripoli`s Metiga military base where he was mobbed by hundreds of supporters.
The visit, his first to Tripoli since his forces seized the city last month, was eagerly awaited in the hope that it would help tackle rivalries emerging among the groups that overthrew Gaddafi.
Abdel Jalil said the NTC "has mapped out a path and we hope that Libyans understand that we have to move along this path fast and that it is no time for revenge."
Many NTC members, including half of the executive committee, moved to Tripoli after it fell late last month, but Abdel Jalil and Jibril were slow to arrive.
Abdel Jalil is expected to tackle political tensions already surfacing between the capital Tripoli and other NTC strongholds.
Relations are particularly strained between Tripoli and the second-largest city Benghazi, which was the rebels` wartime base; and the third-largest city Misrata, which endured a prolonged siege by Gaddafi forces.
Anti-Gaddafi fighters in Misrata have started to challenge NTC authority, refusing to turn over abandoned tanks as requested by interim leaders.
In western Libya, at least 12 people were killed and 16 wounded when two groups of fighters opposed to Gaddafi turned on each other, two officials said on Sunday.
The fighting, which pitted combatants from the towns of Gharyan and Kikla on the one side, and from Asabah on the other, broke out on Saturday during a dispute over ownership of heavy weapons.
Algeria Foreign Minister Mourad Medelci said on Sunday that while they were in contact with the NTC, they would only recognise a new authority once a representative government of the Libyan people was in place.