Armed rebels opposed to the rule of Libyan leader Moammar Gadhafi are holding control of Zawiyah, a city just 50 kilometres from the capital Tripoli, in another indication that Gadhafi's grip on power is weakening by the day.

"Gadhafi Out," hundreds of members of the anti-government forces are chanting in the city centre Sunday. "Free, Free Libya," others yelled.

The rebel forces are preparing the streets to beat back an expected offensive by forces loyal to Gadhafi that have encircled the western city's outskirts.

There are said to be at least six checkpoints controlled by troops loyal to Gadhafi on the road from Tripoli to Zawiya and each one is reinforced by at least one tank.

Zawiya, a key city close Tripoli and refineries, fell into opposition hands on Feb. 24.

Local forces repelled an attempt by militiamen and pro-Gadhafi troops to take back the town that day and remain in control, even as Tripoli itself is still controlled by Gadhafi loyalists.

Inside Zawiya, police stations and government offices have been torched and "Down with Gadhafi" graffiti can be seen everywhere. An effigy of Gadhafi hangs from a light pole in the city's main square. On its chest the words "Execute Gadhafi" are emblazoned.

With a wave of anti-regime uprising sweeping the Arab world, Libya has launched the bloodiest crackdown by far.

The United States and the UN Security Council have imposed sanctions on Libya, and Prime Minister Stephen Harper has said that Canada will enact new sanctions on the regime as well.

On Saturday, U.S. President Barack Obama said Gadhafi has lost his legitimacy to rule and urged the leader to leave power immediately.

Gadhafi has vowed to fight to the end to keep his four-decade grip on power in the North African country.

Gadhafi's son, Seif al-Islam, denied in a TV interview that his father's regime used force or airstrikes against its own people.

"Show me a single attack. Show me a single bomb," he told ABC's "This Week," according to a transcript. "The Libyan air force destroyed just the ammunition sites. That's it."

Asked about Obama's call for his father to step down, he said: "It's not an American business, that's No. 1. Second, do they think this is a solution? Of course not."

CTV's Janis Mackey Frayer says many whom she has spoken to are also trying to imagine a future in which Gadhafi is no longer in power.

"In a country where you have one man doing things his way for 42 years, there's not much of an opportunity for an opposition to form. That's been the concern of a lot of observers of the situation. If there is the ouster of Gadhafi, who takes over? What takes over?" she told CTV News Channel from the country's east.

She notes that there is concern about what sort of force would take over if protesters do achieve their goal of ousting Gadhafi. The country doesn't have a unified army like Egypt does, and many military elements have defected to join the protesters.

"In a lot of the towns that we've been through, people are saying there's really nobody in control right now. It doesn't mean that there's chaos, it just means that people are looking toward the future with a degree of hesitation," Mackey Frayer said.

With reports from the Associated Press