Libya's interim rulers, the National Transitional Council, say their forces have now taken control of much of the southern city of Sabha.
The city was considered one of the key remaining strongholds of fugitive leader Col Muammar Gaddafi's forces.
Nato, whose air-strikes have been vital in bolstering the efforts of anti-Gaddafi forces, said it will extend its air campaign for up to 90 days.
There are also reports of many deaths in Hun, near the desert town of Jufra.
"There are dozens of people killed and wounded in the town and we cannot reach them because of the fierce bombardment [by Gaddafi forces]," one witness told the AFP news agency by telephone.
Fierce fighting also continues at other Gaddafi hold-outs Bani Walid and Sirte.
NTC military spokesman Ahmed Bani told Reuters: "We control most of Sabha apart from the al-Manshiya district. This is still resisting, but it will fall."
Mohammed Wardugu, of the Desert Shield Brigade that is fighting in the area, went further, telling AFP the city was "totally under the control of the revolutionaries".
The NTC had said on Monday that its forces had captured the airport and a leading garrison in Sabha, 750km (465 miles) south of the capital, and taken 150 prisoners from the Gaddafi forces.
Sabha has a large sub-Saharan element in its 100,000 population and many are thought to fear reprisals, given the number of mercenaries employed by Col Gaddafi.
The city has been part of the escape route south - a number of convoys carrying Gaddafi officials have travelled through it to Niger - and anti-Gaddafi forces want to seal it off.
Fierce fighting continues at the coastal town of Sirte, where anti-Gaddafi forces have suffered significant losses.
Nearly 50 fighters have died and more than 200 have been injured, doctors say, since the NTC moved on Col Gaddafi's home town on 15 September.
NTC spokesman Zuber al-Gadir admitted to AFP that "the majority of residents are with Gaddafi" in Sirte because of the former regime's propaganda machine.
Anti-Gaddafi forces are also still engaged in trying to eliminate pockets of resistance outside Sirte.
Nato Secretary General Anders Fogh Rasmussen said the alliance's warplanes would stay in the air as long as Libyan civilians remained under threat.
But he added that the mission would be constantly reviewed and could be called off "at any time".
"We are determined to continue our mission for as long as necessary, but ready to terminate the operation as soon as possible," Mr Rasmussen said.
Meanwhile, the NTC is continuing to gather diplomatic support.
Interim Prime Minister Mahmoud Jibril is at the UN General Assembly meeting in New York.
He said he expected a new government to be announced within 10 days.
The African Union has now said it is ready to support the NTC.