As US warships and fighters massed off the Libyan coastline and the threat of a ''no-fly zone'' appeared imminent, Gaddafi threw in his ultra loyal elite Khamis brigade and mercenary militiamen, to retake the towns closest to the capital.
Apparently wary of threats held out by western nations, including British Prime Minister David Cameron who warned him of military action, Gaddafi launched a six-pronged attack to break encirclement of his capital, but the rebels bolstered by defections from the army repelled his attacks.
The rebels used newly acquired tanks, mortars and machine guns to push back the attack on al-Zawiya town, 50 kms west of Tripoli and six other outlying cities, giving a new dimension to the rebellion, in which atleast 1,000 people have been killed, al Jazeera reported.
Tens of thousands of defections from the ranks of the military and militiamen were reported by the channel which said that reports of US and Nato warships and fighters massing in the Mediterranean Sea could trigger a further switchover from the army.
The battle for al-Zawiya town was intense and went on for six hours, but there was no word on casualties, the Arab channel reported.
Reports also said that Gaddafi''s air force jets bombed ammunition depots in the eastern part of the country which has totally switched sides to his opposition.
"We repulsed the attack. We damaged tanks and the mercenaries and the army troops fled after that," al Jazeera quoted local fighters as saying.
The opposition forces, now labelling themselves as the ''New Libyan Army'', are growing by hours due to defections.
But opposition commanders said it was impossible to say how many of Libya''s 76,000 strong army has defected. They said they have now access to large stores of weapons from looted military stockpiles or smuggled across the border.
The channel said rebel soldiers had become much more organised and had set up a unified military council in the East.
"Small groups of rebel soldiers have volunteered to infiltrate into Tripoli to cause havoc and bolster pro-democracy groups," the channel said.
While his 41-year-old regime appeared to be crumbling on all sides, the Libyan ruler was still steadfast in denial.
Speaking to three western media groups, including BBC and ABC, Gaddafi laughed off suggestions that he would leave strife-torn Libya, insisting that "all my people love me".
But the stiffening of attitude by the US and Nato became clear as Cameron, speaking in the House of Commons, said "a no-fly zone" can be imposed anytime and his troops could be involved in peacekeeping in the country.
The British prime minister told the Commons that the UK and its allies were considering using fighter jets to impose a ''no-fly zone'' over Libya to patrol and shoot down Libyan aircrafts ordered to attack protesters.