Fighters for Libya's interim rulers entered Muammar Gaddafi's hometown Sirte on Saturday in a surprise assault that NATO said it backed to halt brutal acts by followers of the ousted regime.

National Transitional Council (NTC) chief Mustafa Abdel Jalil said an interim government would be announced next week and that the new authorities had control over Gaddafi's internationally ‘banned weapons’.

Misrata military council spokesman Abdel Ibrahim said seven NTC fighters were killed and 145 injured in what appeared to have been a pincer movement launched from the south and east.

Using tanks and pick-up trucks mounted with anti-aircraft guns, the NTC forces cleared away roadblocks set up by Gaddafi forces and drove toward the city centre before putting up their own defences in advanced positions.

On a beach road surrounded by craters and pock-marked buildings, a 106mm anti-tank cannon repeatedly pounded Gaddafi positions, backed by a barrage of mortars and multiple rocket-launchers.

‘We are pushing them back’ after a ‘surprise’ order to attack issued by the NTC's military top brass, commander Mohammed al-Aswawi said in a radio truck monitoring units on the front.

"First we get the families out, and then the order is to attack and free Sirte," he told the media.

"There is also an advance from the south," he added, as the Misrata Military Council said that front was being reinforced by NTC fighters who had taken part in ‘the liberation of Al-Jafra.’

Frontline fighters in Sirte are convinced that one of Gaddafi's sons, Mutassim, is holed up in the city's southern outskirts.

"Mutassim is in there. We hear him on the radio giving orders," NTC operations commander Osama Muttawa Swehly told the media on Saturday.

As the battle raged into the evening, another commander, Hassan Tarhar Zaluk, said NTC forces would have to resume the fight for Sirte on Sunday.

"We're going to stop for the evening. There's no light in there. We'll start again on Monday," he said.

NTC fighters also came under heavy fire as they advanced inside Sirte's eastern gates, another media correspondent reported.

"Our troops went seven kilometres inside through the eastern gate and there were sporadic to sometimes heavy clashes with Gaddafi's forces," said commander Mohammed al-Marimi of the Fakriddin Sallabi Brigade.

The assault was launched after reports of a rapidly deteriorating humanitarian situation in the city of around 75,000 inhabitants.

NATO forces struck at Gaddafi forces after reports they had moved against civilians there, endangering ‘hundreds of families’, a statement from the alliance said.

"Among the reports emerging from Sirte are executions, hostage-taking, and the calculated targeting of individuals, families, and communities within the city," it added.

Heavy fighting also raged in Bani Walid, the only other remaining pro-Gaddafi bastion. Medics reported a total of 30 NTC troops killed so far on that front.

A pro-Gaddafi radio station called for a gathering at one of Bani Walid's squares, after a similar call from Gaddafi's most prominent son, Seif al-Islam, for people to rise up for the town's ‘liberation’.

On the political front, the NTC held talks on forming a new government amid doubts over whether disagreements that prevented a deal last week could be immediately overcome.

‘Differences in views’ between members of the NTC and the executive council had delayed a deal, Abdel Jalil told reporters, but the composition of the interim government would be announced in the coming week.

That had been due to be set up on last Sunday, but was postponed indefinitely because of haggling over portfolios.

Abdel Jalil said the new authorities had control over internationally ‘banned weapons’ from Gaddafi's regime, when asked about the presence of such weapons in the south.

The International Atomic Energy Agency on Friday confirmed the existence of raw uranium stored in drums at the southern city of Sabha.

"These weapons are between Waddan and Sabha," said Abdel Jalil, referring to the other central town.

"We will call for Libyan technicians and the international community to get rid of these weapons safely," he said.

While Libya's new authorities do not know where Gaddafi is, they are focusing on taking Sirte and Bani Walid, two places where some think he might be. Reports have also emerged that he may be in the south.

"General Belgasem al-Abaaj, who we captured on Monday, said that Gaddafi had contacted him by phone about 10 days ago, and that he was moving secretly between (the oases of) Sabha and Ghat," an NTC commander, Mohammed Barka Wardugu, told the media.

Abaaj had said Gaddafi "is helped by Nigerian and Chadian mercenaries who know the desert routes," added Wardugu, spokesman for the Desert Shield Brigade.

Friday's statement from Gaddafi's daughter Aisha that said her father was well and fighting on the ground, and denouncing the new administration in Libya as traitors got a sharp reaction from the Algerian authorities.

Algerian Foreign Minister Mourad Mdeleci described her comments as ‘unacceptable’, the country's APS agency reported. Her telephone message was broadcast by Syria-based Arrai television.

Algeria received Aisha Gaddafi, her mother and other members of their family when they fled Libya in August.

Algeria, which after criticism from the NTC in Libya defended its decision to receive the Gaddafis on humanitarian grounds, on Friday said it was willing to work with the new administration.

In New York, NTC prime minister Mahmoud Jibril told the United Nations General Assembly that a new Libya was coming to life.

But he added: "The asset freeze on our funds must be lifted as urgently as possible."