There are indications that a war plane has been shot down over the Libya rebel’s stronghold of Benghazi in Libya.
Eye witnesses account claimed they saw thick smokes bellowing in the sky as the plane came down.
Libyan leader Moamar Gaddafi’s forces were said to have pushed into the rebel-held city of Benghazi, allegedly defying world demands for an immediate ceasefire and forcing rebels to retreat.
The development comes as a flaming Libyan warplane was seen nosediving into the ground in Benghazi, apparently after being hit by rebel fire as it flew low over the city to attack its military barracks.
A Libyan rebel spokesman said Mr Gaddafi’s forces had entered the city while a Reuters witness said rebels were erecting concrete barricades to defend their headquarters.
The fighting came despite a pledge by the Libyan government that it was observing a ceasefire and as France predicted imminent military action by the West.
The Libyan government denied its forces were in action in or around Benghazi. A government spokesman said they were observing the ceasefire, blaming rebels for attacks.
As explosions shook Benghazi, rebel fighters said they were being forced to retreat from the outskirts of the city where the revolt against Mr Gaddafi began a month ago.
A fighter jet was also shot down over Benghazi.
“I saw the plane circle around, come out of the clouds, head towards an apparent target, and then it was hit and went straight down in flames and a huge billow of black smoke went up,” Reuters correspondent Angus MacSwan said.
“It seems it was attacking the Benghazi military barracks.”
Rebels said Libyan jets had bombed the road to the Benghazi airport and elsewhere on the outskirts.
“They were 60 kilometres away yesterday. Today they are 20 kilometres away and they can be here in a half hour to 90 minutes,” rebel fighter Khalid Ahmed said at a rebel base on the western edge of the city.
The Libyan advance into Benghazi pre-empted an international meeting hosted by France to discuss military intervention in Libya.
The meeting will be attended by US secretary of state Hillary Clinton and Arab leaders.
Libya had declared a unilateral ceasefire on Friday after the UN Security Council authorised a no-fly zone over Libya.
But the United States accused Mr Gaddafi of defying international demands for an immediate ceasefire, and France’s UN envoy predicted military action within hours of the Paris meeting on Libya on Saturday.
“It’s clear we have to move quickly,” a French government source said, contacted after the reports of fighting in Benghazi.
Libyan rebels said they were being forced back by Mr Gaddafi’s forces.
Black plumes of smoke could be seen on the road to the west of the city, a Reuters witness said.
“We have no hope in the Western forces,” Mr Ahmed, the rebel fighter, added as around him rebel forces pulled back from the advancing frontline.
Elsewhere in the city, rebels also reported skirmishes and strikes by Gaddafi forces.
“Fighter jets bombed the road to the airport and there’s been an air strike on the Abu Hadi district on the outskirts,” said Mohammed Dwo, a hospital worker and a rebel supporter.
He was speaking at the scene of an apparent firefight between rebels and what they claimed were two mercenaries who had infiltrated the city and were driving in a car which they said contained a crate of hand grenades.
The two men, in civilian clothes, had been shot and killed and rebels produced blood-soaked identity papers they said showed them to be of Nigerian nationality.
“We were sitting here and we received gunfire from this vehicle then we opened fire and after that it crashed,” rebel fighter Meri Dersi said.
Jamal bin Nour, a member of a neighbourhood watch group, said he had received a call to say government forces were landing by boat, but this was impossible to confirm.
The city has been so rife with rumours and hearsay that it is virtually impossible to verify due to lack of communications.
A unilateral ceasefire declared on Friday by the Libyan government appeared to have done little to convince outside powers to hold off on plans for air strikes to force an end to an increasingly bloody civil war.
Mr Gaddafi said there was no justification for the UN resolution.
“This is blatant colonialism. It does not have any justification,” he said in comments reported by Al Jazeera television.
“This will have serious consequences on the Mediterranean and on Europe.”
France, which along with Britain has been leading a drive for military intervention, is hosting a meeting on Saturday on Libya.
“I guess that after this summit, I think that in the coming hours, I think we will go to launch the military intervention,” the French ambassador to the United Nations, Gerard Araud, told the BBC’s Newsnight program.
French foreign minister Alain Juppe said on Friday everything was ready to launch military strikes in Libya.
Mr Obama made clear any military action would aim to change conditions across Libya – rather than just in the rebel-held east – by calling on Gaddafi forces to pull back from the western cities of Zawiyah and Misrata as well as from the east.
The United States, after embarking on wars in Afghanistan and Iraq, had insisted it would participate in rather than lead any military action.
Mr Obama said the United States would not deploy ground troops in Libya.