At least eight people were killed in the fighting over Ajdabiya, a hospital official said.
Recapturing the city would give the Libyan military a staging ground to attack the rebels' main stronghold, Benghazi, about 100 miles (160 kilometers) farther east along the coastal highway. Moammar Gadhafi's forces were approaching Benghazi when they were driven back by the international air campaign launched last month to protect civilians and ground Gadhafi's aircraft.
For the rebels, losing the city would effectively bottle them into a coastal strip of eastern Libya and allow government forces to more tightly squeeze the few opposition pockets in the rest of the country, including the besieged western port of Misrata, where heavy clashes continued Saturday for a second day.
NATO airstrikes hit armored vehicles firing on civilians near both Misrata and Ajdabiya, said Canadian Lt. Gen. Charles Bouchard, who commands the Libya operation.
Speaking in Naples, Italy, where the alliance's operational center is located, Bouchard said Saturday that NATO jets also had struck ammunition stockpiles east of Tripoli that were being used to resupply forces involved in the shelling of Misrata and other population centers.