The mostly untrained militia army of the National Transitional Council (NTC) has been gradually tightening its strangle-hold around Sirte for weeks in a chaotic struggle that has cost scores of lives and left thousands homeless.
It has also held up the attempt by Libya's new leaders to try to build a democratic government as they say the process will begin only after the city is captured.
NTC commanders say Gaddafi's die-hard loyalists now only control an area measuring about 700m north to south, and about 1.5km east to west; a residential area of mostly apartment blocks.
The biggest obstacle to taking the town has been Gaddafi's snipers hiding in the buildings. Tanks are used to hit the buildings from close range and dislodge the snipers.
Behind the tanks, lines of pick-up trucks and scores of infantry readied for battle on Friday.
Green flags, the banner of Gaddafi's 42-year rule, flew above of the buildings ahead. Gaddafi himself is believed to be hiding somewhere in the vast Libyan desert.
A senior NTC official however denied reports by other officials in the new government that Gaddafi's son Mo'tassim had been captured in Sirte.
Surrounded now on all sides, Gaddafi's remaining forces in Sirte can have no hope of winning the battle, but are still fighting on, inflicting dozens of casualties with rocket-propelled grenades, mortars and small arms.
Human rights abuses
One field hospital received two NTC dead and 23 wounded on Thursday. One of the dead men had been hit while taking food up to the fighters on the front line, doctors said.
One NTC commander said Gaddafi's besieged forces were no longer using heavier weapons and he said they appeared to have lost their cohesion as a fighting force.
"We've noticed now they are fighting every man for himself," said Baloun Al Sharie, a field commander. "We tried to tell them it's enough and to give themselves up, but they would not."
NTC officers say Gaddafi loyalists fear reprisals if they give themselves up.
Some captured fighters have been roughed up by NTC forces and Amnesty International issued a report on Wednesday saying Libya's new rulers were in danger of repeating human rights abuses commonplace during Muammar Gaddafi's rule. The NTC said it would look into the report.
Close to the centre of the fighting in Sirte, government forces found 25 corpses wrapped in plastic sheets. They accused Gaddafi militias of carrying out execution-style killings. Five corpses shown to a Reuters team wore civilian clothes, had their hands tied behind their backs and gunshot wounds to the head.
But as the battle for Libya draws towards what the NTC and Natohope will be a close, both the new government and the Western alliance which helped topple Gaddafi are looking towards a return to normality.
The provisional Libyan government and Nato signed an agreement on Thursday to immediately open air corridors for international civilian flights from Benghazi, and domestic flights between the second city and Tripoli and Misrata.
This is one of the first step toward Nato lifting its no-fly zone over Libya imposed after Gaddafi began a military assault on civilians protesting his one-man rule.