Libyan rebels say they are fighting Muammar Gaddafi's forces in residential areas of the eastern town of Brega, BBC reported.
Rebel forces have been advancing on Brega for several days despite heavy artillery fire from government troops holding the town.
It has not been possible to verify the rebel claims.
The fall of the town, home to one of Libya's biggest oil facilities, would be a major breakthrough for anti-Gaddafi forces, correspondents say.
Brega, about 750km (465 miles) east of the capital Tripoli, has changed hands several times in the fighting along Libya's Mediterranean coast since the rebellion began in February.
"Some small groups have made it inside, but we do not control the whole [town] yet," Mohammed Zawi, a spokesman for the rebel forces, was quoted as saying by AFP news agency.