Pro-government forces have intensified their attacks on Libyan rebels, driving them back tens of kilometres over ground they had taken in recent days.
The BBC's Nick Springate says the rebels have lost Bin Jawad and most have now fled even further east past the town of Ras Lanuf.
Misrata, closer to Tripoli, has also come under heavy attack and blasts have been reported in the capital.
Meanwhile London has been hosting a key summit on the future of Libya.
Anti-Gaddafi forces had made rapid progress westwards from their stronghold in Benghazi in recent days - greatly aided by international air strikes - seizing a number of coastal communities and important oil installations, including Ras Lanuf, Brega, Uqayla and Bin Jawad.
But our correspondent says the situation changed significantly on Tuesday as pro-Gaddafi forces used heavy weaponry, forcing a mass retreat.
The rebels had reached Nawfaliya, 120km (75 miles) from Col Gaddafi's birthplace of Sirte, but pulled back to Bin Jawad, some 30km further east.
There was intense fighting over Bin Jawad, forcing the rebels to abandon the town and flee back towards Ras Lanuf in a convoy of hundreds of vehicles.
Most fighters have now also pulled out of Ras Lanuf, says our correspondent, in an indication of their lack of arms, organisation and their inadequate supply lines.
The rebel retreat came as the UN, Nato, the African Union, the Arab League and others met in London to discuss the way forward for Libya.
Opening the talks, British Prime Minister David Cameron said those attending wanted to "help the Libyan people in their hour of need" and enable them to create a "future free from violence and free from oppression".
He said the attendees must reaffirm their commitment to the UN resolution on Libya, ensure the fast delivery of humanitarian aid and help the Libyan people plan for a post-conflict future.
UN Secretary General Ban Ki-moon said a transition to democracy in Libya would "take time and the support of us all" while US Secretary of State Hillary Clinton said the military action would continue until Col Gaddafi complied with the terms of the UN resolution.
The delegates at the conference:
- Said they were "united in seeking a Libya that does not pose a threat to its own citizens"
- Agreed Col Gaddafi and his regime had "completely lost legitimacy and will be held accountable for their actions"
- Reaffirmed their commitment to the UN resolution on Libya
- Expressed concern for 80,000 people displaced within Libya
- Agreed to established a contact group, chaired by Qatar, to co-ordinate support for Libya
The rebels' Transitional National Council was not invited to the conference itself, but its envoy Mahmoud Jibril and other officials held talks on the sidelines.
Spokesman Mahmoud Shammam said they were grateful for international help but that the "liberation of Libya is the responsibility of the Libyan people".
The council's UK co-ordinator Guma el-Gamaty urged more countries to follow France and Qatar and recognise them as Libya's interim leaders.
Asked whether they would like the international community to provide them with weapons, Mr Gamaty said: "We ask for the political support more than we're asking for arms, but if we got both that would be great."
Mrs Clinton said no decision had been made on arming the rebels but that under the UN resolution there could be a "legitimate transfer of arms if a country were to choose to do that".
In a letter to those attending the conference, Col Gaddafi called for an end to the "barbaric offensive" on his country.
Libyan Deputy Foreign Minister Khaled Kaim has called on those attending to act as "peacemakers, not warmongers".
Misrata 'in danger'
The international military action continued overnight and on Tuesday.
US Navy officials said ships from the US Sixth Fleet attacked three Libyan ships that had been firing indiscriminately at merchant ships in the port of Misrata, west of Sirte.
One of the vessels was destroyed and a second beached, while the third was abandoned, the officials were quoted as saying by Reuters.
A resident of Misrata told the BBC that pro-Gaddafi troops were attacking the city with tanks and heavy arms and that there were snipers in the streets.
Rebel leaders have said at least 124 people have been killed in Misrata in the past nine days.
"Misrata is in danger," a spokesman in Benghazi told the AFP news agency.
"The massacre that was avoided in Benghazi thanks to the intervention of coalition forces will be carried out in Misrata."
Rebel radio has been urging more people in the west to join the anti-Gaddafi uprising.
Nato has denied that its air strikes are meant to provide cover for a rebel advance.
Pentagon spokesman Vice Adm Bill Gortney said on Tuesday that because the Libyan rebels were not well organised, any military gains they made would be tenuous.
He said the rebels were clearly benefiting from the actions of the US, which has started using heavily-armed low-flying aircraft against government forces.
Russia has renewed its expressions of concern, saying intervention in an internal civil war is not sanctioned by UN Security Council Resolution 1973.