Brega, a main oil export terminals in eastern Libya, fell to rebels after a skirmish late on Saturday (local time), said Ahmed Jibril, a rebel commander manning a checkpoint on the westernmost edge of town.
"There are no Gaddafi forces here now, the rebels have Brega under their full control, it is free," Jibril said.
He added that the front line was now 40km away at the desert town of al-Egila, a small collection of houses with a gas station along the coastal highway, about halfway to the massive oil refining complex of Ras Lanouf.
The two oil complexes combined would be responsible for a large chunk of Libya's oil capacity, which has all but stopped since the uprising that began on February 15 and was inspired by the toppling of governments in Tunisia and Egypt.
The Gaddafi regime on Saturday acknowledged the airstrikes had forced its troops to retreat and accused international forces of choosing sides.
"This is the objective of the coalition now, it is not to protect civilians because now they are directly fighting against the armed forces," Khaled Kaim, the deputy foreign minister, said in the capital, Tripoli. "They are trying to push the country to the brink of a civil war."
The rebel turnaround is a boost for President Barack Obama, who has faced complaints from lawmakers from both parties that he has not sought their input about the US role in the conflict or explained with enough clarity about the American goals and exit strategy. Obama was expected to give a speech to the nation today.
"We're succeeding in our mission," Obama said in a radio and Internet address on Saturday. "So make no mistake, because we acted quickly, a humanitarian catastrophe has been avoided and the lives of countless civilians - innocent men, women and children - have been saved."
The UN Security Council authorised the operation to protect Libyan civilians after Gadaffi launched attacks against anti-government protesters who demanded that he step down after 42 years in power. The airstrikes have crippled Gadaffi's forces, but rebel advances have also foundered, and the two sides have been at stalemate in key cities.
Pentagon officials say that forces loyal to Gadaffi are a potent threat to civilians. And they are looking at plans to expand the firepower and airborne surveillance systems in the military campaign, including using the Air Force's AC-130 gunship armed with cannons that shoot from the side doors, as well as helicopters and drones.
Former Libyan ambassador to the United States Ali Aujali called Libya a unique situation.
"If no action will be taken, we will have another massacre in Africa that will be remembered like Srebrenica and Rwanda," he said. "It was the right action at the right time."
