Libyan rebels say they are fighting Muammar Gaddafi’s forces in residential areas of the eastern town of Brega.
Rebel forces have been advancing on Brega for several days despite heavy artillery fire from government troops holding the town.
It has not been possible to verify the rebel claims.
The fall of the town, home to one of Libya’s biggest oil facilities, would be a major breakthrough for anti-Gaddafi forces, correspondents say.
Brega, about 750km (465 miles) east of the capital Tripoli, has changed hands several times in the fighting along Libya’s Mediterranean coast since the rebellion began in February.
“Some small groups have made it inside, but we do not control the whole [town] yet,” Mohammed Zawi, a spokesman for the rebel forces, was quoted as saying by AFP news agency.
“It is now close fighting,” he said.
Three rebel fighters were killed and 96 wounded on Sunday, the agency quoted medical staff as saying – bringing the overall rebel toll since fighting began to 15 dead and 274 wounded.
Earlier another rebel spokesman, Mohammed al-Rajaly, told AP news agency that his forces had liberated the north-eastern half of the city and were moving against government forces in the south-western part.
Reuters reports that Nato aircraft have been targeting pro-Gaddafi forces near Brega in recent days, reporting hits on armoured vehicles and rocket launchers near the town.
Nato said its warplanes hit a military storage facility containing tanks, armoured personnel carriers and ammunition in Tripoli’s eastern outskirts early on Sunday.
Col Gaddafi has refused to step down. In a speech on Saturday, he described the rebels as traitors and rejected suggestions that he was about to leave the country.
His speech came a day after Western and Arab powers said the rebel leadership was the legitimate government of Libya and repeated their demand that Col Gaddafi and his family should give up power.