Diehard supporters of Muammar Gaddafi seized control on Monday of Bani Walid, a one-time bastion of the slain dictator, Libyan officials told the media, claims denied by the interior minister.

The assault on a base of former rebels who helped oust Gaddafi, which killed five people, would mark the first major offensive launched by his loyalists since the ‘liberation’ of Libya on October 23, shortly after the fall of Bani Walid.

"The loyalists of Gaddafi took control of the entire city of Bani Walid," said M'barek al-Fotmani, a former member of the ruling National Transitional Council (NTC) in the desert oasis, 170 kilometres (110 miles) south of Tripoli.

Fotmani said the daylight attack on the base of former rebels killed ‘five thuwar (anti-Gaddafi revolutionaries) including a commander’. Around 30 former rebels were also wounded, he said from inside the base.

No Gaddafi loyalists: Minister

But Libyan Interior Minister Fawzi Abdelali insisted the fighting was caused by "internal problems’ that he said had no connection with Gaddafi loyalists, while confirming the five deaths.

He told Libyan television that the fighting was among the people of Bani Walid, and linked to ‘the issue of compensation for those affected by last year's war’.

"The information we have from inside the city does not say that there are green flags (hoisted on town buildings) and there is nothing in relation to the former regime."

Monday's attack follows an outburst of opposition to the ruling National Transitional Council in the eastern city of Benghazi last week that prompted its chairman, Mustafa Abdel Jalil, to warn of possible ‘civil war’ in post-conflict Libya.

A journalist who managed to enter Bani Walid for a short time said thick smoked billowed into the sky, while the identity of those present was unclear and there was limited evidence of the new Libyan authorities on the roads outside the town.

‘100-150 men attacking us’

Mahmud Warfelli, spokesman of Bani Walid local council, said earlier that the attack was launched by ‘a group of remnants of the old regime’, and called for outside help against a feared ‘massacre’.

"There are around 100 and 150 men armed with heavy weapons who are attacking. We have asked for the army to intervene, but the defence ministry and NTC have let us down," he said.

"(The gunmen) took control and hoisted the green flag on some districts, some important districts in the centre of the city," Warfelli added.

"We're out of the frying pan into the fire. We've been warning about this for the past two months."

A senior NTC member, Fathi Baja, said reinforcements had been sent to protect the town.

"Two hours ago orders were given for the army to go and they are on the way. The fighting is between some Gaddafi supporters and thuwar," he told the media.

Fotmani said the assailants had surrounded the base, which belonged to the May 28 Brigade, a unit attached to the defence ministry, and were carrying green flags, a symbol of the Gaddafi regime.

"The attackers shouted 'Allah, Muammar, Libya and that's it!," he said, referring to a slogan popularised by Gaddafi loyalists during his rule.

"I call upon Libya to save Bani Walid thuwar urgently. Their ammunition is almost over."

Snipers positioned on school, mosque

He also said ambulances were unable to evacuate those wounded because there were ‘snipers positioned on a school and a mosque in the vicinity’ of the attack.

Fotmani said later he had ‘fled the base and Gaddafi fighters are now occupying it and have taken control of all heavy weapons that were inside’, adding the assailants set fire to the local council's main building.

Bani Walid was one of the last pro-Gaddafi bastions to fall in the bloody uprising against the former dictator's rule.

Its capture was followed days later by the fall of the longtime strongman's hometown Sirte in a battle, which also led to his killing and marked the ‘liberation’ of Libya.

Speaking on Libya al-Hurra television on Sunday, Abdel Jalil warned the new Libya would fall into a ‘civil war’ unless protests against the NTC ended.

Crowds of protesters in Benghazi – the city, which first rebelled against Gaddafi last year – had earlier thrown homemade grenades at and stormed the NTC office before setting it ablaze, witnesses said.

The demonstrators denounced the interim government for its lack of transparency and accused the NTC of marginalising some wounded veterans of the uprising in favour of people previously loyal to the slain dictator.

In recent months Libya has also seen clashes between rival militias, comprised of the former rebels.