A huge blast rocked the coastal town and plumes of smoke streaked the sky, said reporters, as clashes continued hours after the opposition said they had repelled one of the biggest pro-Qaddafi counteroffensives yet.
The rebels said they were surrounding regime fighters who were in the university area and at the gates of the Sirte oil company. Smoke rose from shell fire and heavy machine gun fire rattled through Brega.
"Now they're limited to the university and the gates of the oil company. Their ammunition is running out. They're firing randomly. We'll take these positions by nightfall," said one rebel fighter who gave his name as Mohammad.
Earlier rebel leaders in the main eastern town of Benghazi said they had fought back the offensive in Brega, the westernmost town held by the poorly-armed Libyan opposition.
"They tried to claim Brega ,they ended up with a failure. We kicked them out, the battle is done," said Mustafa Gheriani, the media organiser for the rebels at their headquarters in Benghazi.
"We heard numbers of 10 to 15 martyrs but we are still surveying".
But as fighting raged which is 200 kilometers southwest of Benghazi, saw the bloodied bodies of four young men in a morgue.
Rebel volunteer Mashallah Aqub said: "There are four more bodies in another morgue and at another hospital and other bodies we haven't been able to collect yet."
The explosion was heard near the university, one of several locations where rebels said Qaddafi forces armed with tanks and heavy artillery were holed up. Witnesses afterwards saw a fighter jet streak through the sky.
The pro-Qaddafi fighters, including mercenaries believed to be from neighbouring Chad, briefly seized the oil terminal, residents and officials said.
Anti-regime forces have seized most of the east of the country since the uprising began on February 15 and have taken tentative steps towards setting up a parallel government.
But the lightly armed forces, mostly comprising military defectors and volunteers have been watching warily for a fight back.
That fight back came in the early hours of Wednesday, said residents and fighters who fled Brega earlier, just hours before Qaddafi appeared on television to repeat his denials that he faces any opposition.
Oil company official Ahmed Ali said the sound of gunfire had woken him early Wednesday at his firm's compound.
"I saw mercenaries from Chad who had taken up position at the company gates. I left in a car with a colleague. They stopped the car to search us for weapons before letting us go," Ali said.
Another refugee from Brega, who gave his name as Mustafa, said Qaddafi’s forces lay in wait overnight about 30 kilometres from the town.
"At dawn they returned and took control of the refinery. The rebel forces then arrived and made them retreat," he said.
Meanwhile there Qaddafi’s forces also launched an airstrike in Ajdabiya, 40 kilometers from Brega, witnesses said.
One witness said the airstrikes had targeted a weapons dump that was also hit two days ago but residents said it had hit a former army base near the town. There were no casualties, they said.
"There has been an air strike three kilometers past Ajdabiya towards Brega. It was the military base of El Haniya. It was not successful. They (pro-Qaddafi forces) hit outside the military base," he said.
"Nobody was injured because it hit in no man's land."
Qaddafi has lost most of the east of the oil-rich North African country but remains entrenched in the capital Tripoli in the west.
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