Explosions and gunfire continue to rattle the capital city as the rebel force entered Bab al-Aziziya after fighting for five hours with Gadhafi loyalists outside.
Fierce street battles broke out overnight after government forces made one last stand.
But as the day wore on, it appeared that the rebels had taken control of the capital, and it seemed Gadhafi's 42-year rule was coming to an end. Rebels ripped posters of Gadhafi in half, while others kicked the broken statue of the longtime dictator.
Gadhafi was not inside the compound and has not been seen for days. It has long been believed there is a series of underground tunnels running from his compound to the coast and he could have used to them to escape.
A pro-Gadhafi TV outlet quoted the dictator as saying he retreated from his Tripoli compound in a "tactical move." The station says it will air the comments from Gadhafi in full soon and reported an excerpt in which Gadhafi vows his forces will continue to fight until victory or death.
The victory at the compound came hours after Gadhafi's son and heir apparent turned up to rally pro-government fighters. Seif al-Islam said his father was safe and that regime forces were winning.
He was greeted as a hero, and he took journalists on a drive through parts of the city still under the regime's control.
"We are here. This is our country. This is our people, and we live here, and we die here," he told AP Television News. "And we are going to win, because the people are with us. That's why we are going to win. Look at them - look at them, in the streets, everywhere!"
It was not clear whether Gadhafi's son had escaped from rebel custody or never been captured in the first place. His arrest had been announced on Monday by both the rebels and the Netherlands-based International Criminal Court, which has indicted him and his father.
The rebel leadership - which had said Seif al-Islam was captured without giving details on where he was held - seemed stunned. A rebel spokesman, Sadeq al-Kabir, had no explanation and could only say, "This could be all lies."
He also said another captured Gadhafi son, Mohammed, had escaped house arrest.
Meanwhile, the only working hospital in Tripoli is overwhelmed with the dead or injured.
At a news conference Tuesday morning, NATO officials warned that the situation in Tripoli remained very dangerous. They promised that NATO would continue its bombing campaign against loyalist forces, which began in March.
Calif. lawmakers react to Libya events
California Sen. Dianne Feinstein, the head of the Senate Intelligence Committee, said she is concerned with how the U.S. will move past Gadhafi and provide stability.
"You have five countries now that are changing governments. This one has no institutions for governance. You've got to set them up and be able to maintain them. And that's where other countries are going to have to come in and be of help," Feinstein said.
Thousand Oaks Congressman Elton Gallegly says they need to find out who the rebels are and where they want to go now.
"We've got to make sure before we go in and start spending billions and billions of dollars that we know who and why we're spending those dollars," he said. "Clearly, we want to make sure the Libyan people are protected."
It might be difficult to find many people who are sorry to see Gaddafi's regime toppled by the rebels.
Libyan-Americans follow developments closely
Libyan-Americans across Southern California are glued to their TV and the Internet as history unfolds in Tripoli.
The Gibani family is riveted to the unfolding events as Gadhafi's 42-year reign appears to crumble before their eyes.
"I have already one brother who is in the battlefield right now, he's in Tripoli fighting," Mohammed Gibani said.
What's happening in Libya is what the family has wanted for decades. Their father was part of an early uprising. When it failed, they fled for their lives.
"The first thing (Gadhafi) did was demolish the constitution. There is now law," Gibani said.
Dr. Mahmoud Traina, who works at Harbor-UCLA Medical Center, traveled independently with the group Libyan Emergency Task Force to provide medical aid.
"When I was there, it was a complete euphoria of freedom," Traina said. "When I would see people on the streets, in spite of all the killings, in spite of all the injuries, now all of a sudden to have this freedom, it was a euphoria. They would tell me, 'You've tasted freedom before. We've never had this before."
The Associated Press contributed to this report.