Libyan rebels aiming to topple Colonel Muammar Gaddafi came under fire from government troops in Zawiyah on Wednesday.
Snipers have taken to the rooftops and the town is under continued mortar fire.
Zawiyah is a key gain for the rebels as it sits on the main highway from the west to Tripoli.
Rebel forces are closing in on the capital from the west and south, cutting off its road links to the outside in the process.
An increasingly confident insurgent leadership says the uprising against Gaddafi’s 41-year rule is entering its final phase.
The rebel National Transitional Council denies it is negotiating with Gaddafi to resolve the six-month conflict.
There have been persistent reports of UN-supervised meetings being held in Tunisia.
NTC leader Mustafa Abdel Jalil On Tuesday reiterated that Gaddafi must step down and leave the country.
His call was echoed by US Defence Secretary Leon Panetta who said that “Gaddafi’s days are numbered”.
On Monday, Gaddafi, speaking from an undisclosed location, urged his followers to rise up against the rebels and NATO.