Pro-Gaddafi forces are undertaking a twin-pronged assault on rebel positions in both east and west Libya.
Government soldiers have surrounded and made their first ground assault on Ajdabiya - the last town before rebel headquarters in Benghazi.
Tanks and artillery are pounding the only major rebel-held western city - Libya's third largest city, Misrata.
The advance by troops loyal to Libya's leader comes ahead of the UN Security Council discussing a no-fly zone.
The UK, France and Lebanon have called for this in a draft resolution.
Massacre feared
Rebel leaders, who rose up against Libya's long-time leader in February demanding political reforms, want the international community to prevent pro-Gaddafi forces from using aircraft against them.
But countries such as the US, Russia, China and Germany are understood to harbour doubts about the wisdom of getting involved.
The Arab League has backed the idea but Tuesday's meeting of G8 foreign ministers in Paris failed to do so.
After regaining several towns in recent days, Col Muammar Gaddafi's allies say they are now in control of Ajdabiya.
Rebel leaders said the assault had been repelled and that they also still controlled the road to Benghazi, Libya's second city.
But a BBC correspondent was unable to reach Ajdabiya, because the city was surrounded by government troops.
He said rebel fighters had begun preparing new defensive positions on the road to the opposition stronghold of Benghazi, 160km (100 miles) away.
Rebel fighters also denied claims that they have been forced from Misrata.
"The shelling on the city stopped and the rebels have captured some tanks. The battle is continuing on the eastern side, but it is not a heavy one," a resident called Mohammed told the Reuters news agency by telephone.
The BBC's Jon Leyne in Benghazi says the situation in the city is getting more tense by the hour and the calls for a no-fly zone more desperate.
Jalal al-Gallal of the National Libyan Transitional Council said there would be a "massacre" if the international community did not intervene.
"He [Gaddafi] will kill civilians, he will kill dreams, he will destroy us," he told the BBC.
A broadcast on state TV urged all armed forces in eastern Libya to join a government advance on Benghazi, Reuters reported.
Earlier, Col Gaddafi's son Saif al-Islam told Euronews TV that: "Everything will be over in 48 hours" even if a no-fly zone is imposed.
But our correspondent says such announcements appear to be propaganda designed to unnerve the opposition.
Gaddafi taunts UK
Even if Ajdabiya falls, the government does not seem to have enough troops in the field to attack Benghazi, a city of one million people, he says.
However, medical aid agency Medecins Sans Frontieres (MSF) on Wednesday announced that it was pulling its staff out of Benghazi due to the heavy fighting.
It said it would continue to send supplies to health facilities in Libya.
French Foreign Minister Alain Juppe on Wednesday used his blog to condemn the slow response of the international community to the situation in Libya.
"Only the threat of force can stop Gaddafi. It is by bombarding, with the few dozen planes and helicopters he really has, his opponents' positions that the Libyan dictator has turned the balance," he wrote.
He also said that several - unnamed - Arab nations were prepared to take part in such action.
British Prime Minister David Cameron urged the UN to "show leadership".
Italy's Foreign Minister Franco Frattini, however, ruled out military intervention, according to Reuters.
"We cannot have war, the international community should not, does not want and cannot do it," he told a hearing of a parliamentary commission in the Senate.
Italy, which ruled Libya for three decades, has had close relations with Col Gaddafi.
In a TV speech on Tuesday evening, Col Gaddafi taunted the UK and France.
"Britain no longer exists. It is a trace of what it used to be. It has been promoting attack on Libya. Is there a common border between us? Are you our guardian? By what right?" he said.
He went on to "dare" the US, Britain and France to "give their people freedom like I did to the Libyan people".
Our correspondent in Benghazi says the defiant speech was projected upside-down onto a big screen in the city's main square.
He says people threw shoes at the screen in a traditional expression of their contempt for Col Gaddafi.
source : bbc.co.uk
