Libyan rebels claim to have taken control of the strategic oil refinery town of Brega as confirmation comes of a meeting between US envoys and members of Moamer Kadhafi's regime.
Rebel spokesman Shamsiddin Abdulmolah said the bulk of Kadhafi's forces had retreated to Ras Lanuf another oil hub some 50 kilometres to the west leaving just 150-200 fighters pinned down in the refinery town.
But the government insisted it had headed off the rebel assault.
"They tried to recapture the town, but were repulsed losing 500 of their fighters in the battle," Mussa Ibrahim told reporters in Tripoli.
In its latest operational update on Tuesday, Nato said it had struck "eight armed vehicles and two armoured fighting vehicles" in the vicinity of Brega.
It also said its warplanes on Monday hit an antenna radar system at Tripoli's main airport which the regime was using to track allied aircraft.
"This information was provided to the pro-Kadhafi forces with the intent of coordinating their tactical operations against Nato air assets and Libyan civilians," it said.
Amid mounting diplomatic pressure on Libyan strongman Kadhafi to step down after four decades in power, US envoys confirmed they held a rare meeting with regime representatives over the weekend.
A US official said the aim of the meeting was to deliver the message that the only way for the situation to move forward is for Kadhafi to step down. He added there were no plans for further talks.
Saturday's one-off meeting came a day after the US and other Western and regional powers recognised the rebel Transitional National Council, TNC, as Libya's legitimate authority.
Russian news agencies meanwhile said on Tuesday that Kadhafi's Foreign Minister Abdelati al-Obeidi is to visit Moscow for talks with his Russian counterpart Sergei Lavrov on Wednesday.
The two men are expected to discuss the current situation in Libya and African Union efforts to end the conflict.