Libyan fighters raised the new government's flag over the oasis of Bani Walid Monday and hoped for the swift fall of the other remaining redoubt of Moamer Kadhafi loyalists, Sirte, as relatives of his henchmen fled.
In the evening Kadhafi forces fired rockets and small arms at National Transitional Council fighters deployed on the eastern edge of two Sirte neighbourhoods as a NTC commander said he expected tense fighting Tuesday.
Cries of Allahu Akhbar (God is Greatest) and bursts of celebratory machinegun fire filled the desert air over the centre of Bani Walid, as NTC troops feted their capture of the loyalist bastion after a six-week siege.
"The city of Bani Walid has been completely liberated," said Saif al-Lasi, a commander of the Zliten Brigade, one of the NTC units which took part in the final assault launched on Sunday.
The overall commander of NTC forces in the city, Musa Yunis, said all resistance from loyalist forces had now ceased.
"Kadhafi's troops left their vehicles behind and even changed into civilian clothing so they would be hard to find," he said.
"There is no resistance in Bani Walid anymore. Most of Kadhafi's troops have fled, and those who remain are not causing problems."
NTC field commander Jamal Salem said his fighters had encountered "heavy resistance" from Kadhafi loyalists holed up in the Saharan town, 170 kilometres (105 miles) southeast of Tripoli.
The desert region's Warfala tribe was a major recruiting ground for elite units of Kadhafi's regime and devotion to the fugitive strongman runs deep.
Two NTC fighters were killed and 16 wounded in Monday's fighting, commander Salem Ghit told AFP.
The new regime troops had launched a pincer attack, with columns advancing from north and south which met in the city centre capturing the castle at the heart of the sprawling oasis.
The jubilant fighters hoisted the red, black and green flag of the new government over mosques and other buildings, tearing down the all-green emblem of the ousted regime, an AFP correspondent reported.
The fall of Bani Walid means that Kadhafi loyalists are now restricted to just one tiny enclave in the strongman's hometown Sirte.
NTC fighters, who have laid siege to his loyalists in the Mediterranean coastal city for more than a month, took heart on Monday from the flight of several relatives of leading Kadhafi regime officials.
Among the escaping civilians were the mother and a brother of Moamer Kadhafi's spokesman Mussa Ibrahim, a senior NTC commander said.
"These are families of regime officials. There is Mussa Ibrahim's mother and brother among them," said Wessam bin Hamaidi, as seven cars loaded with men, women and children sped out of the battleground neighbourhoods.
Bin Hamaidi, in charge of military operations in Sirte's eastern front, said the passengers included "no big fish," but some fighters were mixed in with the fleeing civilians.
Signup to our newsletter and follow us on Facebook and Twitter!
Hassan al-Droe, an NTC representative from Sirte, said relatives of Kadhafi regime officials started fleeing in the morning from the Dollar and Number Two neighbourhoods, where diehard loyalists are holed up.
"This morning a lot of families from the regime left the two neighbourhoods in 20 cars," Droe said.
"They told us that Mutassim is inside," he added in reference to Kadhafi's son and national security chief.
As NTC fighters shuttled back and forth to the front line and surrounded the contested neighbourhoods, Droe said it was only a matter of time before they took control of the last two pockets of resistance in Sirte.
"The way the families came out has raised hope that we will capture the neighbourhoods very soon," he said, as machinegun and mortar fire rocked the area.
Mustafa bin Dardef, a field commander with Zintan brigade said fighters took control of some buildings in the evening as sporadic bursts of rocket and small arms fire resounded.
"There are still some clashes and we expect fighting to remain intense tomorrow also," he said.
Also in the evening around 30 people -- men, women and children -- were taken out of the two neighbourhoods by NTC fighters.
Journalists were not allowed to speak to them and could hear women and children screaming.
Bin Hamaidi said intelligence gathered from captured pro-Kadhafi fighters enabled the besieging NTC forces to target what they believed was the loyalists' operations room in what is now their last enclave in Libya.
"Some people who we captured this morning gave us some information that one of the buildings in the Number Two neighbourhood was being used as an operations centre for the Kadhafi forces.
"So we used the tanks to hit the operations centre," he said.
An AFP correspondent saw two tanks moving along the Mediterranean shoreline from the east to fire at Kadhafi positions from the seaward side.
NTC forces control the entire waterfront and the loyalist forces in the two neighbourhoods just inland are completely surrounded.
Sirte is a key goal for the NTC, which has said it will not proclaim Libya's liberation and begin preparing for the transition to an elected government until the city is completely under its control.
On a lightning visit to Tripoli on Monday to reopen the British embassy, Foreign Secretary William Hague paid tribute to the NTC fighters, saying the world had consistently underestimated their military ability.
Hague said it was now vital that the myriad of regional militias that had brought an end to Kadhafi's 42 years of iron-fisted rule be turned into a cohesive regular army.
"It is important for the militias to be integrated into the work of the National Transitional Council, and then of course into the national transitional government that will be formed once the liberation of the country is declared," Hague said.
He said the task of bringing together "so many different groups" that contributed to the revolution was a key challenge, and pledged 20 million pounds ($32 million) for Libya's stabilisation fund and another 20 million pounds to support political and economic reform.