Rebel forces had initially captured Ajdabiya during an advance along Libya's east coast that was halted and reversed in a counter-offensive by government forces backed by superior air power earlier this month.
Rebel fighters were now reportedly on their way to the key oil port town of Brega, where Gaddafi forces have retreated, witnesses said.
On Friday, Western warplanes bombed Gaddafi's tanks and artillery outside the town to break the battlefield stalemate and help rebels retake the town.
Many fighters belonging to forces loyal to Muammar Gaddafi were also taken hostage by rebels.
The port city has experienced some of the heaviest fighting between rebels and forces loyal to Gaddafi since the uprising began on February 16.
Meanwhile, Barack Obama, the U.S. president, said Saturday that the military mission in Libya was succeeding.
"Because we acted quickly, a humanitarian catastrophe has been avoided and the lives of countless civilians - innocent men, women and children - have been saved," Obama said.
But Obama reiterated that the military mission was clear and focused and that the role of American forces had been limited.
"Our military has provided unique capabilities at the beginning, but this is now a broad, international effort... Key Arab partners like Qatar and the United Arab Emirates have committed aircraft. And as agreed this week, responsibility for this operation is being transferred from the United States to our NATO allies and partners.
"This is how the international community should work - more nations, not just the United States, bearing the responsibility and cost of upholding peace and security."
Meanwhile, the African Union, which has rejected foreign intervention in Libya's affairs, said on Friday it plans to facilitate talks to help end the conflict.
"The AU action is ... aiming at facilitating dialogue between the Libyan parties on reforms to be launched to eliminate the root causes of the conflict," the union's commission chairman Jean Ping told a meeting in Addis Ababa, Ethiopia.
He said that the process should end with democratic elections in Libya.
It was the first statement by the AU since the UN Security Council imposed a no-fly zone last week and a Western coalition began air strikes on Libyan military targets.
Libya's delegation to the meeting, at which the rebels were not represented, called for an end to air strikes and said the government was committed to upholding a ceasefire it declared on Sunday.
The delegation said Tripoli is ready to implement an AU roadmap to resolve the Libyan crisis, while also demanding a halt to the Western-led coalition's military intervention.
The AU roadmap calls for an immediate end to all hostilities, "cooperation on the part of the relevant Libyan authorities to facilitate humanitarian aid," and "protection for all foreign nationals, including African migrant workers."
PA/PA
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MNA