Rebel negotiator Abdullah Kanshil said yesterday the talks had broken down after Moussa Ibrahim, Gaddafi's chief spokesman and a top aide, had insisted the rebels put down their weapons before entering the town, some 90 miles (140 kilometers) southeast of Tripoli.
Rebel forces control most of the oil-rich North African nation and are already setting up a new government, but Gaddafi and his staunchest allies remain on the run and enjoy support in several central and southern areas, including Bani Walid and the fugitive leader's hometown of Sirte.
The rebels have said the hard-core loyalists are a small minority inside the town, but are heavily armed and stoking fear to keep other residents from surrendering.
"We feel sorry for the people of Bani Walid," said Kanshil, himself a native of the town, speaking to reporters at a rebel checkpoint about 70 kilometers to the north.
"We hope for the best for our town." The rebels have extended to Saturday a deadline for the surrender of Gaddafi's hometown of Sirte and other loyalist areas but some have warned they could attack Bani Walid sooner because many of the most prominent former regime officials were believed to be inside.
There has been speculation that Gaddafi himself along with his son Seif al-Islam had been there at some point, and the apparent presence of Ibrahim indicates that the town was a haven for high-level Gadhafi aides.