Supporters of ousted Libyan leader Muammar Gaddafi and a militia loyal to the new government clashed in the town of Bani Walid, about 200 km (120 miles) south-east of Tripoli, a local resident told Reuters.
The resident, who did not want to be named, said four people were killed and 20 wounded in the fighting. He said the sides were using heavy weaponry including 106 mm anti-tank weapons.
The violence was sparked when members of the militia loyal to Libya's ruling National Transitional Council arrested some Gaddafi loyalists, prompting other supporters of the former leader to take up arms, the resident said.
Bani Walid, base of the powerful Warfallah tribe, was a Gaddafi strong-hold during Libya's nine-month civil war. Anti-Gaddafi rebels fought for months to take the town.
Local tribal elders eventually agreed to let NTC fighters enter the town, but relations have been uneasy since and there have been occasional flare-ups of violence.
(Reporting by Taha Zargoun in Tripoli; Editing by Giles Elgood)