WISHTATA, Libya -- Libyan fighters clashed Friday with Moammar Gadhafi's supporters inside Bani Walid, one of the last towns holding out against the country's new rulers, the former rebels said.
Abdullah Kenshil, the former rebels' chief negotiatior, said the former rebels were fighting gunmen positioned in houses in the town and the hills that overlooked it.
Anti-Gadhafi forces were moving in from the east and south, and the fighters deepest inside Bani Walid were clashing with Gadhafi's men about a mile (2 kilometers) from the center of the town, Kenshil said.
"They are inside the city. They are fighting with snipers," he said.
The rebels had set a Saturday deadline for the town to surrender or face an offensive. Kenshil said the Friday evening attack was provoked by Gadhafi forces firing rockets from inside Bani Walid at the former rebels' positions around the town.
"They forced this on us and it was in self-defense," he said.
He said three Gadhafi loyalists had been wounded and three killed, while the former rebels had one dead and four wounded. He said the former rebels had taken seven prisoners.
Kenshil said the former rebels believed that there were about 600 Gadhafi supporters in and around Bani Walid.
"Snipers are scattered over the hills and the rebels want to chase them," he said. "There is hand-to-hand combat. The population is afraid so we have to go and protect civilians."
Interpol said it had issued its top most-wanted alert for the arrest of Gadhafi, his son Seif al-Islam and the country's ex-chief of military intelligence. The three are sought by the International Criminal Court for alleged crimes against humanity, and there have been reports Seif al-Islam is in Bani Walid.
The elder Gadhafi hasn't been seen in public for months and went underground after anti-regime fighters swept into Tripoli on Aug. 21. As the National Transitional Council tries to establish its authority in Libya, speculation about Gadhafi's whereabouts has centered on his Mediterranean hometown of Sirte, southern Sabha, and Bani Walid, 90 miles (140 kilometers) southeast of Tripoli. Gadhafi loyalists in all three towns have been given until Saturday to surrender, or face an all-out battle.
Before the reported Friday evening assault, Gadhafi holdouts in Bani Walid fired mortars and rockets toward the fighters' position in a desert dotted with green shrubs and white rocks, killing at least one and wounding several. Loud explosions were heard about six miles (10 kilometers) from the front line, followed by plumes of black smoke in the already hazy air. NATO planes circled above.
NATO says it is acting under a U.N. mandate to guarantee the safety of Libya's civilian population. Its bombing campaign has been crucial to the advance of Gadhafi's military opponents.
Daw Salaheen, the chief commander for the anti-Gadhafi forces' operation at Bani Walid, said his fighters responded with their own rocket fire, and advanced on the town.
Officials in the National Transitional Council -- which is the closest thing to a government Libya has now but still has only shaky authority -- had set a Saturday deadline for the city of 100,000 to surrender. They have hoped to negotiate a peaceful entry into the city, but talks with local leaders have gone nowhere.
Before the former rebels announced their offensive, the dozens of fighters deployed at checkpoints outside the city were clearly impatient to move in.
Osama al-Fassi helped unload ammunition from the back of a large truck with a sense of urgency. The bearded man in sand-colored fatigues said that with Gadhafi loyalists rocketing the front line, he didn't attach much importance to the political leaders' plans on when to move.
"We in the field decide when we enter the city with force," he said as he loaded wooden boxes of Russian manufactured ammunition into a pick up truck that was headed to the front. The truck was quickly filled with RPGs still in plastic wrapping, small mortar rockets, and metal boxes of ammunition.
Another fighter, Abdullah bin Tashi, ran from comrade to comrade, urging them to move toward the front line.
"They've got mortars and (rockets) and they're rocketing us," he told one man. "Come on, you need to move forward, send your men to the front."
Asked if he needed to await order from chief commander Saleheen, he shouted: "Who is Daw? I don't recognize Daw."
A fighter who appeared dressed for a weekend outing in jeans, a blue button-down shirt and sunglasses walked from the front line, looking despondent.
"I lost a friend inside," he told reporters, choking on tears.
Ahmed Momen, a 23-year-old medic for the anti-Gadhafi forces at the front line, said casualties on his side in Friday's mortar and rocket exchanges included three injured and one dead
The anti-Gadhafi fighters said they had captured 10 Gadhafi fighters they suspected were spying on them. Dressed in fatigues, their hands tied behind their backs, the 10 were being held in two pickup trucks at the Wishtata checkpoint, about 30 kilometers (20 miles) from Bani Walid. An Associated Press photographer who saw the trucks said two of the 10 appeared to be dead.
The seizure of the capital by the then-rebel forces effectively ended nearly 42 years of Gadhafi's autocratic, violent and unpredictable rule. The new leaders now control most of the country, but as long as Gadhafi is on the loose, able to urge his followers on with messages from underground, they cannot claim total victory.
Mahmoud Shammam, a spokesman for Mahmoud Jibril, the head of the former rebels' acting Cabinet, said Gadhafi's inner circle has been broken up. Most of its members are under arrest or in the process of handing themselves over, Shammam said.
Moammar Gadhafi, Seif al-Islam and former military intelligence chief Abdullah al-Senoussi are the only people at large who matter, Shammam said in a telephone interview from Qatar.
In a statement Friday, Interpol Secretary General Ronald K. Noble called the red notices it issued to its 188 member countries Friday "a powerful tool" in helping lead to the capture of the Gadhafis and al-Senoussi. A red notice is the equivalent to being on the Lyon, France-based international police body's most-wanted list.
Associated Press writers Sarah El Deeb in Cairo and Jenny Barchfield in Paris contributed to this report.