Acting Prime Minister Mahmoud Jibril said he had been shot in the head in an exchange between Gaddafi loyalists and National Transitional Council (NTC) fighters.

He confirmed that Col Gaddafi had been taken alive, but had died before reaching hospital.

Video footage suggests Col Gaddafi was dragged through the streets. It is unclear from the footage, broadcast by al-Jazeera TV, whether he was alive or dead at the time.

Nato's governing body, meeting in the coming hours, is expected to declare an end to its Libyan bombing campaign. Nato Secretary-General Anders Fogh Rasmussen said that with the death of Col Gaddafi "that moment has now moved much closer".

World leaders urged the NTC to carry through its promise to reform the country.

UN Secretary General Ban Ki-moon called it a "historic" moment, but warned: "The road ahead for Libya and its people will be difficult and full of challenges."

Col Gaddafi was toppled from power in August after 42 years in charge of the country. He was making his last stand in Sirte alongside two of his sons, Mutassim and Saif al-Islam, according to reports.