Libyan officials say 15 civilians - including three children - were killed in a Nato attack on a building west of the capital, Tripoli.
Nato has said its planes struck "a key Gaddafi regime command and control node" to the west of Tripoli.
A BBC correspondent taken by the Libyan government to see a compound in the western area of Sorman says the building has been pulverised.
On Sunday Nato said one of its missiles struck a residential area in Tripoli.
It admitted a "weapons failure" may have led to civilian casualties.
BBC Middle East editor Jeremy Bowen was taken to see the remains of the country estate of Khweildy al-Hamidy, a member of the Libyan Revolutionary Command Centre, the inner circle of government.
Libyan officials told him that eight rockets slammed into the place at about 0400 or 0500 on Monday morning (0200 or 0300 GMT).
There are shell holes and craters in the houses in the compound, our correspondent says, after what was a very comprehensive attack.
Nato has confirmed it carried out operations in the area of Sorman, which lies halfway between Tripoli and Zawiya to the west.
"In the early hours of Monday 20 June, Nato warplanes carried out a precision air strike against a key Gaddafi regime command and control node in the vicinity of Zawiyah to the west of Tripoli," Nato said in a statement.
"Nato carried out rigorous analysis and conducted persistent information surveillance reconnaissance over a prolonged period of time in the area prior to the strike."
Funding for rebels
Mr Hamidy has been part of Col Muammar Gaddafi's inner circle since the 1969 coup that brought the Libyan leader to power. Officials say Mr Hamidy himself escaped the air strike unharmed.
On Sunday, Nato admitted "a weapons systems failure" may have led to civilian casualties in an air strike that morning on Tripoli.
The alliance said the intended target was a missile site, but "it appears that one weapon" did not hit it.
The Libyan government earlier said Nato had bombed a residential area, killing nine civilians, including two babies.
Late on Monday, Libyan rebels said 22 security personnel had defected from Col Gaddafi's forces in the south of the country.
Four of the defectors told journalists in the eastern city of Benghazi they had been under orders not to give captured rebels the rights of normal prisoners.
"Our direct officers gave us orders such as, catch 'those rats'," said Major Lamin Sidi Ibrahim al-Tabouwi, Reuters reported. "We were ordered to show no mercy, not to respect their [rebels'] rights."
Meanwhile, rebel leaders said their administration had run out of money as donors' pledges had not materialised.
They told a news conference in Benghazi that they were still waiting for funds that should have been deposited by last week.
EU foreign ministers meeting in Luxembourg have agreed to tighten sanctions on Col Gaddafi's government. The assets of six port authorities will be frozen, the EU said in a statement. Humanitarian shipments will be exempt.
"The EU acknowledges the urgent financial needs of the TNC in order to serve the Libyan people," the statement said.
And the EU said that the "mobilisation of international resources, including, where possible, through the use of Libyan frozen funds... is key to support an inclusive transition process."
But speaking on the margins of the meeting, Italian Foreign Minister Franco Frattini warned that Nato was endangering its military credibility by mistakes in targeting which led to civilian deaths.
"Nato's credibility is at stake, you can't run the risk of killing civilians, this is something that is absolutely unacceptable but neither can you have this continued lack of communication," Mr Frattini said.
"We are not properly informing [Libyan] public opinion which can't compete with Col Gaddafi's daily media propaganda and Nato needs to think about that."
Meanwhile, the United Arab Emirates (UAE) has frozen the assets of 19 Libyan individuals and institutions in compliance with UN sanctions adopted on 27 February.
Nato's mission - to enforce a no-fly zone over Libya to protect civilians using "all necessary measures" short of a ground invasion - began in March in response to Col Muammar Gaddafi's violent response to a popular uprising.
The intervention was mandated by the UN, and led by France, Britain and the US until the end of March, when Nato took over.
Having initially been given 90 days - which would have run out on 27 June - the mission has been extended for a further 90 days.