After bold claims earlier in the week, fighters for Libya's interim government regrouped in central Sirte on Friday after being forced to retreat by Qaddafi-loyalists.
National Transitional Council (NTC) troops remained in city center where they retreated on Thursday under heavy fire, an AFP correspondent reported.
Qaddafi holdouts continued to put up fierce resistance in the Dollar and Number Two residential neighborhoods in northwest Sirte in a to-the-last-bullet last stand that has put the lie to NTC boasts victory would be quick.
"Yesterday evening, we used artillery cannon to shell the neighborhoods," Nasser Moghassabi, a frontline field commander with the Martyrs of Free Libya Brigade told AFP. "The situation today remains the same. We are still surrounding the two neighborhoods."
NTC commanders said on Thursday the Gaddafi loyalists were cornered within about two square kilometers of the city.
The commanders said four pro-NTC fighters were killed on Thursday, including two by friendly fire, and another 40 were wounded, mostly by snipers.
"There are still 500 pro-Qaddafi fighters in Sirte and our forces today arrested 15" of them, Fayisal Ahmad Bringo, a rebel fighter, told AFP.
NTC field commander Beloun Al Shaari of the Martyrs of the Mountains Brigade told AFP the strategy was "to close in inch by inch."
Sirte is a key goal for Libya's new leaders, who have said they will not proclaim the country's liberation and begin preparing for the transition to an elected government until the city has fallen.
The interim government officially began its siege of Sirte on September 15, after several abortive pushes into the outskirts of the city where Qaddafi loyalists concentrated as the regime fell. The fighting there has been especially intense.
Last week NTC commanders attempted to take the city twice in offensives they called their "final assault." Since Friday at least 95 of their fighters have been killed with hundreds wounded.
According to the lastest reports, NTC forces have encircled Qaddafi loyalists after seizing Sirte's waterfront, its showpiece conference centre, university, hospital and main square.
Meanwhile, NTC officials backtracked on their announcement fighters in Sirte captured Qaddafi's son Mutassim in Sirte after rebel commanders claimed he was in their hands.
"There was some confusion about the reports of Mutassim's capture," Abdel Karim Bizama said on behalf of the NTC's de factor prime minister Mustafa Abdel Jalil. "As soon as we have confirmation, there will be an official announcement of his arrest."
Premature claims of the capture of fugitive strongman Muammar Qaddafi and his sons have been quite regular in Libya's civil war. Several such claims by rebel commanders have proven false in the past.