Libyan rebels have pledged to launch an assault within days on Muammar Gaddafi's home town, the ousted strongman's last major bastion of support.
The rebels and Nato said that Gaddafi loyalists were negotiating the fate of Sirte, a heavily militarised city some 250 miles east of the capital, Tripoli.
Mustafa Abdel Jalil, the head of the rebels' National Transitional Council, said that negotiations with forces in Sirte would end on Saturday after the Muslim holiday of Eid al-Fitr, when the rebels would "act decisively and militarily".
"We can't wait more than that," he told reporters in the eastern city of Benghazi. "We seek and support any efforts to enter these places peacefully. At the end, it might be decided militarily. I hope it will not be the case."
Colonel Roland Lavoie, a Nato spokesman, said it is possible Sirte might surrender without a fight. "We have seen dialogues in several villages that were freed - I'm not saying with no hostilities, but with minimal hostilities," he said.
Col Lavoie said Nato would continue its mission as long as civilians in the country are under threat, although the area around the capital, Tripoli, is now "essentially free".
The rebels also demanded that Algeria return Gaddafi's wife and three of his children for trial after they fled, raising tensions between the neighbouring countries.
Safiya Gaddafi, her daughter Aisha and sons Hannibal and Mohammed entered Algeria on Monday, while Gaddafi and several other sons remain at large. In Washington, the Obama administration said it had no indication that Gaddafi himself has left the country.
Algeria's Health Ministry said that Aisha Gaddafi had given birth to a girl. Algerian news reports said Aisha's pending childbirth was one reason for the country's decision to take the family in.
The departure of Gaddafi's family was one of the strongest signs yet that the long-time leader has lost his grip on the country. Algeria's decision to host members of the Gaddafi clan is an "aggressive act against the Libyan people's wish," said Mahmoud Shammam, information minister in the rebels' interim government.