Tripoli: At least 13 rebels were killed in a “regrettable” NATO airstrike around Brega on Sunday as fierce fight erupted between Muammar Gaddafi's troops and pro-democracy forces. The defiant Libyan leader rejected offers for a conditional ceasefire.

NATO said it was investigating into reports that a coalition warplane struck a rebel position on the outskirts of Brega in the midst of heavy fighting with Gaddafi's forces.

It said it "regretted" any loss of civilian life. "Nato jets are in the sky over Libya because they are enforcing the no fly zone, the UN mandate to protect civilians," NATO's Oana Lungescu said.

Doctors at a hospital in Ajdabiya said that three medical students were among the dead.

According to reports, a rebel convoy on its way to the front line near Brega fired an anti-aircraft gun into the air. Assuming it to have come from Gaddafi's forces, coalition warplane targeted the vehicles.

At least 13 people are reported to have been killed in the incident.

Meanwhile, the rebels claimed victory over Gaddafi's forces in the battle for Brega, a strategic oil town.

A spokesman of Gaddafi's government said the coalition air strike had left 7 civilians dead. Mussa Ibrahim, the government spokesman, termed the strike a "crime against humanity".

He dismissed the ceasefire offer by the rebels as a "mad" move aimed at buying time since they were facing defeat.

"They are asking us to withdraw from our own cities. .... If this is not mad then I don't know what this is. We will not leave our cities," Ibrahim said.

Rebels claimed that Gaddafi's forces had killed at least six civilians in Misurata during heavy shelling and firing.

In the rebel-stronghold of Benghazi, opposition leader Mustafa Abdul Jalil on Saturday said they would agree to a ceasefire if Libyans still under Gaddafi's regime are granted freedom of expression and forces loyal to him withdraw from cities.

"We agree on a ceasefire on the condition that our brothers in the western cities have freedom of expression and also that the forces that are besieging the cities withdraw," he said at a joint press conference with Abdelilah Al-Khatib, the UN envoy.

Soon after the UN resolution approving a no fly zone over Libya, Gaddafi had announced a ceasefire which was rejected by the coalition.

Amid the intense fighting in the east, the Arab channel said the rebels appeared to have more communication equipment such as radios and satellite phones, and were working in more organised units.

Abdel Fatah Yunis, the former Interior Minister who resigned to join the opposition, has been appointed as the commander of the opposition military forces combating pro-Gaddafi troops, Al Jazeera said.

Bregha, 800 km east of Tripoli, has seen a see-saw battle after Gaddafi's forces struck hard at the rebels who had earlier pushed them out.

Even as Gaddafi's forces have recaptured the rebel-held towns including Ras Lanuf and Bin Jawad, there was mounting speculation of his aides looking for an exit strategy.

The embattled leader suffered a major setback when his Foreign Minister Moussa Koussa defected.

Treki, a former Foreign Minister and ex-President of the UN General Assembly who has worked closely with Gaddafi for decades, announced his exit on opposition websites, declaring "it's our right to live in freedom and democracy."

There is speculation that some other senior leaders, close to 68-year-old Gaddafi, may also dump him in a bid to end his 41-year-old rule.

Al-Jazeera and other media reports said guards have been posted to prevent any other official from leaving the country.