Forces loyal to Libyan leader Col Muammar Gaddafi are reported to have made gains against anti-government rebels in two key areas.
Western journalists in the city of Zawiya, west of Tripoli, confirmed the Gaddafi regime's claims that the city had fallen after days of fighting.
Rebels are reported to have fled from the oil port of Ras Lanuf to the east.
EU leaders are due to discuss the crisis, with the UK and France leading calls for a strong response.
UK Prime Minister David Cameron and French President Nicolas Sarkozy called on Thursday for an immediate halt to violence against civilians and for Col Muammar Gaddafi and his "clique" to leave.
But they made clear that any foreign action within Libya, including a no-fly zone, could take place only if it had wide international support.
Nato defence ministers discussed a no-fly zone on Thursday but decided more planning was needed.
'Threat to Benghazi'
Rebel fighters said on Friday that government forces had entered Ras Lanuf by boat and in tanks. Reports speak of hundreds of rebels in cars and trucks fleeing eastwards on the Mediterranean coastal road.
Meanwhile, Col Gaddafi's son Saif al-Islam warned rebels in the stronghold of Benghazi that government troops were on their way.
But Mustafa Abdul Jalil, who has emerged as the main opposition leader, has given a defiant interview to the BBC.
He urged the international community to follow the lead of France by recognising the rebel administration in Benghazi as the legitimate government of Libya.
He called on Western governments to help with the fight, saying: "Everybody should know that there is no balance between our capabilities and Muammar Gaddafi's. He is besieging cities to ban people from leaving them."
Meanwhile, three Dutch soldiers captured in eastern Libya during a botched mission to help evacuate foreigners have been freed.
They arrived in Athens early on Friday after being flown out on a Greek military plane.
In other developments:
- Gulf Arab states said the Gaddafi regime was illegitimate and urged contact to be made with the rebels
- US President Barack Obama's top intelligence adviser James Clapper predicted government forces would defeat the rebels
- The BBC News website appears to have been blocked by the Libyan authorities
Earlier in the day, government forces attacked Ras Lanuf with barrages of tank and artillery fire.
Hundreds of rebels in cars and trucks fled eastwards on the Mediterranean coastal road.
And the Gaddafi regime's claims to have retaken Zawiya, 50km (30 miles) west of Tripoli, were backed up by reporters Bill Neely from the UK's ITV network and Deborah Haynes from the Times newspaper, who reached Zawiya on Thursday.
In a blog post Neely said the city had been wrecked by days of bombardment, adding: "The only people on [the streets] were bands of Gaddafi's men, high on victory and bent on revenge, searching buildings for any sign of the rebels who held them at bay for a week."
As government forces drove forward, Saif al-Islam vowed to crush all opposition.
And he repeatedly rejected any international intervention, saying: "We will never ever welcome the Americans here. Libya is not a piece of cake, we are not a Mickey Mouse."
Meanwhile, the International Committee of the Red Cross said that Libya had now descended into civil war.
However, the African Union has reiterated its rejection of any idea of foreign military intervention in Libya.
Ramtane Lamamra, commissioner of the AU's Peace and Security Council, said the body would appoint five heads of state to travel to Libya shortly in an effort to end the conflict.
The revolt began in mid-February when opponents to Col Gaddafi's 41-year rule seized towns and cities in the east, after successful popular uprisings in neighbouring Tunisia and Egypt.