Rebels in Misrata reported being out-gunned and overpowered by Gadhafi's troops.
Facing military brigades with tanks, the rebels were pleading for help from the international community.
President Barack Obama said the U.S. is days away from turning over control of the air assault on Libya to other countries, though he did not say how that would be accomplished.
Obama spoke Tuesday with British Prime Minister David Cameron and French President Nicolas Sarkozy in hopes of quickly resolving the squabble over the transition.
Earlier, a U.S. fighter jet went down during an air strike in Libya, but it's believed a mechanical failure - not gunfire - brought the warplane down.
It was the first major loss since the allied air capaign began three days ago.
Both crew members onboard were able to eject to safety, escaping with only minor injuries. They are safe and back in American hands, according to a U.S. official.
The F-15E Strike Eagle crashed near Bu Mariem, which is about 24 miles east of Benghazi.
An official said a Marine Corps Osprey search-and-rescue aircraft retrieved the pilot. The second crew member, a weapon's officer, was recovered by Libyan rebel forces.
A spokesman for the Africa Command said the crewmembers were separated because they used parachutes to eject from the jet at high altitudes, ending up in different areas.
The exact cause of the crash was being investigated.
Meantime, while the campaign to protect Libyan civilians is considered a success, U.S. authorities say Moammar Gadhafi's forces continue to strike rebel positions.
Coalition forces pounded Libyan military targets with 24 more Tomahawk missiles, expanding the no-fly zone over the North African nation. In the coming days, the no-fly zone will be extended and eventually head toward Tripoli.
"Gadhafi is killing civilians inside Ajdabiya," said Khaled Hamid, a rebel who said he been in Gadhafi's forces but defected to the rebels. "Today we will enter Ajdabiya, God willing."
The U.S. hopes to turn over leadership of the mission to another country in the coalition in a matter of days, but it is not clear who would take over.
President Barack Obama has made it clear that he wants Gadhafi to step down.
Military officials have said the airstrikes are not specifically targeting Gadhafi.
The Associated Press contributed to this report.