The rebels are now in control of the strategic eastern Libyan town of Ajdabiya.
Fighting against Gaddafi’s forces lasted all of Friday night, but the government’s troops were eventually driven out.
The rebels control what is a gateway from western Libya to their eastern stronghold in Benghazi and the oil-producing town of Tobruk.
Euronews reporter Mustafa Bag said: “Rebels are celebrating victory here at the southern entry to the city. Thousands of people are gathering here, and celebrating by firing shots into the air.”
Ajdabiya had been the scene of somewhat of a stalemate between the two sides after the rebels were pushed back towards the east by the leader’s men.
Coalition air strikes nearby allowed the rebels to gain the upper hand and defeat a better-equipped opponent.
A rebel spokesman said the town is ’100 per cent’ in their control and said they have taken 13 prisoners from amongst Gaddafi’s troops.
They say they will now take the road towards Brega, 80 kilometres further west, fighting government troops along the way.