Hundreds of Libyan protesters stormed the base of a hardline Islamist militia in Benghazi on Friday, forcing the group to flee and then setting fire to the military compound.

Members of the Salafist jihadi group Ansar al-Sharia fired in the air before being forced out of their base by the demonstrators.

The assault came after an estimated 30,000 residents of Libya's second city rallied earlier in the day against the influence of militias in the eastern city, which critics say have put themselves above the law.

To shouts of ‘The martyrs' blood was not shed in vain’ the demonstrators pushed into the compound, which was pillaged and set ablaze.

Their protest drowned out a smaller rally by hundreds of radical Salafists angry over a film and cartoons deemed offensive to Islam.

Ansar al-Sharia has been accused of involvement in the September 11 attack on the US consulate in Benghazi in which the US ambassador Chris Stevens and three other US citizens were killed. It denies the charge.

On Friday, US Secretary of State Hillary Clinton for the first time described that assault as a ‘terrorist attack’.

The militia, which rejects democracy and refuses to join the national security forces, raged against a film made in America mocking Islam and French cartoons depicting the Prophet Mohammed.

"This brigade was a big problem for us and for everybody. It was a centre of extremists," said one of the demonstrators, 32-year-old Tawfik Mohamed.

"The death of the ambassador was the spark that set off the fire," said another demonstrator.

Earlier Friday, a group of Benghazi residents stormed the barracks of another group, the Martyrs of Abu Slim brigade, and ousted its members.

"We kicked them out and called the army to take over this place," Hamza Jehani told AFP, adding that around 70 people had forced their way inside and driven the militiamen out.

"No to armed formations" and "Yes to the Libya army" read banners raised by protesters at the Tibesti Hotel before marching to Al-Kish Square, near barracks housing several brigades.

"Our law is God's law, not the law of the jungle," women chanted.

Banners paid tribute to the slain US ambassador, with signs reading "Libya lost a friend" and "We want justice for Stevens."

Organisers had called the march to demand that the central government in Tripoli tame the armed groups that have retained huge powers since last year's Western-backed uprising overthrew Moamer Kadhafi.

They demanded the withdrawal of powers conferred on the militias and urged the national congress to pass legislation criminalising them and passing a law on bearing arms.

The organisers also called for the withdrawal of all armed groups from state buildings and institutions and support for measures to revitalise the police and army.

Organiser Mohammed Abujanah told AFP Benghazi's chronic security problems stem from the failure to disband the brigades of ex-rebels.

"We are saving Benghazi from insecurity," he said, saying the authorities were wrong to integrate the brigades into the security forces as intact units rather than disbanding them and selecting competent individuals from them.

The protest was also to reject extremism, which Abujanah described as "part of the brigades problem" and as a sign to the international community that Benghazi still needs its presence and moral support.

"Benghazi needs support now more than ever," he said.

"We have an elected body, now we need a strong army. Benghazi will regain its sparkle despite all the sad and unhappy events," Abujanah added.

The rival protest by Ansar al-Sharia drew hundreds of people waving black and white flags inscribed with the Muslim declaration of faith.

"There is no God but God," they chanted, as well as "Obama is the enemy of God," referring to US President Barack Obama.

The militia, which rejects democracy and refuses to join security forces which they see as tainted by Kadhafi loyalists, raged against a film made in America mocking Islam and French cartoons depicting the Prophet Mohammed.

"France and America are attacking us by mocking our prophet, not the other way round," said Mohammed Abdullah, a 30-year-old jobless man.

A brigade member said: "It wasn't enough for them to produce a film denigrating the Prophet in America, off goes France insisting on publishing cartoons in its newspaper that are offensive to our Prophet."

"We will never tolerate that."

Attack helicopters and fighter jets flew low over Benghazi in a clear warning to both camps. Police, troops and community leaders patrolled the site.