The development was reported as the U.S. Senate called on the U.N. to enforce a "no-fly" zone over Libya and the Pentagon moved two Navy amphibious warships into the Mediterranean Sea, along with an extra 400 Marines, in case they are needed to evacuate civilians or provide humanitarian relief.
The Libyan sources told the Times the revolutionary council is drawing a distinction between airstrikes and foreign intervention, which they oppose.
Top stories: Turmoil in the Middle East
“If it is with the United Nations, it is not a foreign intervention,” Abdel-Hafidh Ghoga, the council’s spokesman, told the Times.
Gadhafi already accuses Western powers of fomenting the uprising, so any action by the U.N. or individual nations carries risks, the Times said.
“If he falls with no intervention, I’d be happy,” said one senior council official said of Gadhafi. “But if he’s going to commit a massacre, my priority is to save my people.”
The U.N. Security Council would have to approve any "no-fly" zone requests, but Russia and China appear cool to intervention, the Times said.
The strikes would be limited to Gadhafi's stronghold south of Tripoli, Bab al-Aziziya, and installations like radar stations, sources told the Times.
At a Pentagon news conference Tuesday, Defense Secretary Robert Gates said American military intervention in Libya is unlikely, but he did not rule out other options, such as providing air cover for Libyan rebels.
'Range of options'
Asked specifically about establishing a "no-fly" zone over Libya, Gates said military actions "have their own consequences" for U.S. interests, not just in Libya but throughout the greater Middle East.
"We also have to think about, frankly, the use of the U.S. military in another country in the Middle East," Gates added, referring to the long war in Iraq and its backlash in the Arab world. "So I think we're sensitive about all of these things, but we will provide the president with a full range of options."
The Senate, in passing the "no-fly" resolution, condemned the "gross and systematic violations of human rights in Libya" and demanded that Gadhafi leave office.
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Also Tuesday, Secretary of State Hillary Clinton warned that Libya is at risk of collapsing into a "protracted civil war." amid increasingly violent clashes with anti-government rebels.
"The stakes are high," she told the Foreign Affairs Committee in the House of Representatives.
The United States must lead an international response to the crisis, including expanding already tough financial and travel sanctions against Gadhafi, his family and confidants and possibly imposing a "no-fly" zone over Libya, she said.
As she spoke, Gadhafi and forces still loyal to him sought to protect their remaining strongholds in and around Tripoli and take back rebel-held areas in eastern Libya.
Clinton said U.S. officials were aware that defecting military officers were attempting to organize fighters to defend areas they hold and "even try to take Tripoli away from Col. Gadhafi." Gates, however, said the United States has an incomplete picture of the rebels' potential for prevailing on their own. Nor was it clear how many civilians have died, he added.
Earlier, a Libyan rebel officer said army units that have rebelled against Gadhafi are organizing under a unified council to launch an attack against forces still loyal to the leader.
"All the military councils of Free Libya are meeting to form a unified military council to plan an attack on Gadhafi security units, militias and mercenaries," Capt. Faris Zwei told journalists at a military base in Ajdabiyah.
But he also said the rebels were waiting for Gadhafi opponents in the capital Tripoli and other cities to "free" themselves. "We will give them time to have this honor," he said at the base in the east, which is under rebel control.
"We want to give every city the honor of freeing itself. If this is delayed, we will intervene," he said.
In Zawiya, another rebel-held city and the closest to Tripoli, residents earlier Tuesday passed out sweets and cold drinks to fighters and celebrated with a victory march after they managed to repel an overnight attack by forces loyal to Gadhafi.
"Allahu Akbar (God is Great) for our victory," residents of Zawiya chanted as they paraded through the city's main square.
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They carried on their shoulders an air force colonel they said had just defected to the rebels' side.
Witnesses said pro-Gadhafi forces battled rebels for six hours overnight but could not retake control of the city 30 miles west of Tripoli.
They said the last of several assaults by the Gadhafi loyalists came at around 3 a.m. local time.
Residents said they killed 10 pro-Gadhafi soldiers and captured about a dozen others without suffering any casualties of their own, The New York Times reported. A government spokesman confirmed the death toll, the Times said.
"We will not give up Zawiya at any price," said one witness. "We know it is significant strategically. They will fight to get it, but we will not give up. We managed to defeat them because our spirits are high and their spirits are zero."
The witnesses in Zawiya said youths from the city were stationed on the rooftops of high-rise buildings to monitor the movements of the pro-Gadhafi forces and sound the warning if they thought an attack was imminent. They also spoke about generous offers of cash by the regime for the rebels to hand control of the city back to authorities.
Since the revolt against Gadhafi's 41-year-old rule began two weeks ago, his regime has launched the harshest crackdown in the Arab world, where authoritarian rulers are facing an unprecedented wave of uprisings.
Gadhafi has already lost control of the eastern half of the country and at least two cities close to the capital — Zawiya and Misrata. He still holds the capital Tripoli and other nearby cities.
A refugee crisis
The U.N. refugee agency UNHCR says more than 110,000 people, mainly foreign migrants, have fled Libya to neighboring countries and thousands more are arriving at the borders .
Tunisian border guards fired into the air Tuesday to try to control a crowd clamoring to get through a border crossing.
Meanwhile, about 30 more U.S. citizens who are still in Libya have contacted the State Department for help in their evacuation, State Department spokesperson P.J. Crowley said on Tuesday.
International pressure to end the crackdown has escalated dramatically in the past few days.
France said it would fly aid to the opposition-controlled eastern half of the country.
The European Union imposed an arms embargo and other sanctions, following the lead of the U.S. and the U.N.
On Tuesday, the U.N. General Assembly unanimously suspended Libya's membership in the U.N. Human Rights Council because of violence by Libyan forces against protesters. The panel is investigating human rights abuses in Libya.
Protracted civil war?
The U.S. and Europe were freezing billions in Libya's foreign assets.
"We are going to squeeze him economically in conjunction with the rest of the international community," U.S. Ambassador to the U.N. Susan Rice said on NBC's TODAY Show. "We're going to squeeze him militarily ... We are looking at every way to limit Gadhafi's ability to rearm and supply himself with military means as well as financially to reduce his ability to continue to attack his people."
Rice added that the U.S. is prepared to provide humanitarian assistance if called upon.
British Prime Minister David Cameron told lawmakers: "We do not in any way rule out the use of military assets" to deal with Gadhafi's regime.
In Moscow, a Kremlin source suggested Gadhafi should step down, calling him a "living political corpse who has no place in the modern civilized world," Interfax news agency reported.Video: Foreign workers in Libya mass at border
Gadhafi, in an interview with ABC News at a seafront restaurant in Tripoli on Monday, laughed off a question about whether he would step down.
"They love me. All my people with me, they love me," he said. "They will die to protect me, my people." Gadhafi invited the U.N. or any other organization to Libya on a fact-finding mission, ABC reported.
He denied using his air force to attack protesters but said planes had bombed military sites and ammunition depots.
Rice: Gadhafi sounds 'delusional'
Gadhafi's remarks were met with derision in Washington.
"Any time you have someone who laughs with American and international journalists while slaughtering his own people, I think they are not only delusional, one has to begin to question their grip on reality," Rice said Tuesday on The TODAY Show .
"I think we have to assume we are dealing with somebody who is no longer — if ever was — fit to lead his nation and whose behavior is unpredictable and irrational," she added.
In an interview with the U.K.'s Sky News, Gadhafi's son Saif said Rice was "unfit to comment on Libya" as she was not Libyan.Story: Gadhafi's son investigated over PhD plagiarism claims
He refused to accept the regime had lost control of eastern Libya and described the rebels in Zawiya as "terrorists," according to Sky News.
Gadhafi added that it was "not acceptable" for any other country to use force against Libya, but added "we are not afraid."
The Associated Press and Reuters contributed to this report.