A brigade commanded by the son of Libyan dictator Muammar Gadhafi's made an intensified assault on the city of Zawiya Friday, in an attempt to take down anti-government protestors.
One witness said the fighting killed 18 people and wounded 120 others. Another person told Reuters News that as many as 50 were killed.
Troops failed to retake the rebel-held city, which is just 30 miles from Libya's capital of Tripoli.
Meanwhile more than 1,500 protestors marched in the capital, continuing demands for Gadhafi to step down.
Gadhafi's forces fired tear gas at the protesters as they marched out of a mosque in Tripoli with anti-Gadhafi chants.
So far, the opposition has successfully repelled attempts by Gadhafi loyalists to retake rebel-held areas in eastern Libya.
However, they don't have the capability to go on the offensive against government strongholds in the west and have asked foreign powers to assist them with air strikes.
Thursday, President Barack Obama condemned Gadhafi's bloody crackdown and called for the embattled leader to relinquish power.
"The violence must stop," he said. "Moammar Gadhafi has lost legitimacy to lead and he must leave."
The president has approved the use of U.S. military aircraft to help refugees. He also left open the idea of a no-fly zone over the North African nation, something Sen. John McCain, R-Ariz., has called for.
"What are the chances that, in his desperation, that Gadhafi just starts to kill people?" McCain asked. "We all admit that he's insane. So wouldn't we want to prevent that from happening?"
U.S. Secretary of Defense Robert Gates expressed reluctance about employing such a measure.
"A no-fly zone begins with an attack on Libya, to destroy the air defenses," he noted. "So it is a big operation in a big country."
Meanwhile, hundreds have already died in Libya and Gadhafi has warned that thousands more will die if the U.S. or NATO intervenes.