Moammar Gadhafi called on his people Monday morning to "liberate Libya" from NATO and "traitors," a day after rebels captured a key town on the road west to Tunisia, severing Tripoli's main supply route.

But Gadhafi's Interior Minister arrived in Egypt with members of his family on Monday, official sources at Cairo airport told Reuters, amid reports that he was abandoning the regime.

Egyptian officials said the minister arrived with nine members of his family, saying he was vacationing.

Late Sunday, Gadhafi regime envoys were talking with rebels at a hotel on the Tunisian island of Djerba, a source with direct knowledge of the talks told Reuters -- though a Tripoli government spokesman denied it.

The talks followed a dramatic advance by the rebels that won them control of the town of Zawiyah, 50 kilometers (30 miles) west of Tripoli on the coast, enabling them to halt food and fuel supplies from Tunisia to the capital.

Tripoli was not under immediate threat, but rebel forces are now in their strongest position since the uprising against Gadhafi's 41-year rule began in February, controlling the coast both east and west of Tripoli.

The rebels are helped by NATO aircraft which, under a UN mandate to protect civilians from Gadhafi's forces, are bombing military facilities and equipment that are trying to crush the rebel fighters.

Gadhafi's speech Monday, delivered over a poor-quality telephone line and broadcast by state television in audio only, was his first public address since rebel fighters launched their latest offensive.

"The Libyan people will remain and the Fateh revolution (his seizure of power in 1969) will remain. Move forward, challenge, pick up your weapons, go to the fight for liberating Libya inch by inch from the traitors and from NATO," he said.

"Get ready for the fight ... The blood of martyrs is fuel for the battlefield," Gadhafi said, in what state television said was a live speech.

In Djerba late Sunday, security staff turned away a Reuters reporter from the hotel where the source, who spoke on condition of anonymity, said the talks were being held.

Lights were on inside the hotel and a man in jeans and T-shirt, a list in his hand, was standing outside with hotel security staff.

In Tripoli, government spokesman Moussa Ibrahim blamed Western leaders and the media for rumors that the government was engaged in talks on Gadhafi's flight from the country.

"This information is absolutely incorrect and it is part of a media war against us. Their target is to confuse us, break our spirit, and shake our morale," he said. "The leader is here in Libya, fighting for the freedom of our nation. He will not leave Libya."

Gadhafi's characteristically defiant speech followed a day of combat across northwest Libya during which rebels said they had seized the town of Surman, next door to Zawiyah, there was fighting in the town of Garyan that controls the southern access to Tripoli, and shooting could be heard near the main Libyan-Tunisian border crossing.

Rebel flag

Rebels from the Western Mountains advanced north into Zawiyah late Saturday, and Sunday morning, about 50 rebel fighters were milling around near the central market, triumphantly shouting "Allahu Akbar!" ("God is greatest").

The red, black and green rebel flag was flying from a shop. Where it passes through Zawiyah, the main highway linking Tripoli to Tunisia was empty of traffic.

Rebel fighters told Reuters there were still Gadhafi forces in the town, including snipers on tall buildings. Bursts of artillery and machinegun fire could be heard.

One rebel fighter said Gadhafi's forces controlled the oil refinery on the northern edge of Zawiyah -- a strategic target because it is the only one still functioning in western Libya and Gadhafi's forces depend on it for fuel.

The fighting was spreading west from Zawiyah along the coastal highway toward the main Ras Jdir border crossing with Tunisia. A rebel spokesman calling himself Abdulrahman said rebels had seized Surman, the next town west along the coast from Zawiyah.

But at the border crossing to Tunisia, Libyan customs and immigration officers were operating as usual, despite reports of clashes in the area late on Saturday.

On another front in Sunday's fighting, heavy gunfire could be heard from the town of Garyan, a Reuters reporter in the area said. A rebel fighter told Reuters: "We control 70 percent of Garyan. There is still fighting taking place at the moment."

But government spokesman Ibrahim said Zawiyah and Garyan were "under our full control" but that there were small pockets of fighting in two other locations in the area around Tripoli.

The coastal highway between Tripoli and Tunisia had not been blocked by the fighting, Ibrahim said in a telephone interview on Sunday, but foreigners were not being allowed to use the route "to save them from any bullets here or there."

Rebels, backed by NATO warplanes, have been trying since February to end Gaddafi's rule in the bloodiest of the uprisings convulsing the Middle East.

After a period of deadlock, the rebels' advance to the Mediterranean coast near Tripoli represents a major shift in the balance of forces.

Gaddafi says the rebels are armed criminals and al-Qaeda militants, and has described the NATO campaign as an act of colonial aggression aimed at stealing Libya's oil.

(Additional reporting by Ulf Laessing in Ras Jdir, Tunisia, Tarek Amara in Tunis, Hamid Ould Ahmed in Algiers; Writing by Christian Lowe; Editing by Tim Pearce)