The US has announced sanctions against the Libyan government, as UN Secretary General Ban Ki-moon urged the body's Security Council to take "decisive action" over the Libya crisis.
US President Barack Obama signed an executive order blocking property and transactions related to the country.
Transactions involving assets of Muammar Gaddafi and some close associates were blocked.
Libya's UN envoy deserted him in dramatic scenes in New York.
On Friday, an anti-government demonstration in the Libyan capital Tripoli came under heavy gunfire. Around 1,000 protesters are thought to have been killed by troops attempting to quell the insurrection.
"The Libyan government's continued violation of human rights, brutalization of its people, and outrageous threats have rightly drawn the strong and broad condemnation of the international community," said Mr Obama in a statement late on Friday.
"These sanctions therefore target the Gaddafi government, while protecting the assets that belong to the people of Libya."
Witnesses reported the latest deaths and injuries as militiamen and government troops confronted protesters as they emerged from mosques following Friday prayers and started demonstrating in several areas of the city.
At the same time, Libyan state TV showed Colonel Gaddafi speaking from the Tripoli's old city ramparts, urging the crowd to arm themselves and defend the nation and its oil against the anti-Gaddafi elements who have taken control of large parts of the country.
"We shall destroy any aggression with popular will," he said. "With the armed people, when necessary we will open the weapons depots. So that all the Libyan people, all the Libyan tribes can be armed. Libya will become a red flame, a burning coal."
Earlier, at a hastily organised news conference at the UN in New York, Libyan deputy ambassador Ibrahim Dabbashi described Col Gaddafi, who has been in power for 42 years, as a "madman". He warned that thousands would die in Tripoli because the Libyan leader would never flee and would fight to the end.
Much of the east of the country is in the hands of anti-Gaddafi protesters and units of the Libyan military that have crossed over to them.
Secretary General Ban said violations of human rights had been carried out by the Libyan government.
He said that 22,000 people had fled Libya via Tunisia, and a further 15,000 via Egypt.
"Much larger numbers are trapped and unable to leave," he added. "There are widespread reports of refugees being harassed and threatened with guns and knives."
He said it was important for neighbouring countries, including those in Europe, to keep their borders open to those fleeing the violence.
Mr Ban also said that there was a food crisis inside Libya that the UN World Food Programme (WFP) expected to worsen. The WFP says Libya's food supply chain is at risk of collapse because imports have not been getting into the country and food distribution is hampered by violence.
Diplomats at the UN Security Council say Britain and France have drawn up a draft resolution with a package of measures aimed at isolating Libya's political and military leaders. As well as targeted sanctions, this could include an arms embargo, and a proposed referral of the situation in Libya to the International Criminal Court.
Libya's ambassador to the UN, Mohamed Shalgham, denounced Col Gaddafi on Friday, just three days after praising him as "my friend".
He told the Security Council he "could not believe" Col Gaddafi's troops were firing on the protesters, but having seen the Libyan leader call for the protests to be put down by force, he was now backing sanctions.
When he finished speaking, he was embraced by his weeping deputy, Ibrahim Dabbashi, who in turn was hugged by other diplomats.
'Exaggerated media campaign'
The BBC's Middle East editor Jeremy Bowen has entered the Libyan capital at the invitation of the Libyan government.
Saif al-Islam Gaddafi, son of the Libyan leader, told him that the reports of extreme violence were an "exaggerated media campaign" run by "hostile Arab TV channels".
It was not true that Libya had bombed civilians, Mr Gaddafi said, although he did say that the air force had bombed ammunition dumps that were in enemy hands.
Visitors to Tripoli would not hear gunfire but might hear fireworks, Mr Gaddafi said. He criticised the protesters, some of whom wanted an Islamic "Afghan solution" to the country's problems.
He admitted that the east of Libya was "a big mess". People were behind his father, Mr Gaddafi said, and would come out into the streets to support him.
White House spokesman Jay Carney said the Obama administration was acting "to put pressure on the regime" to cease the violence. "Colonel Gaddafi has lost the confidence of his people," he added.
Evacuations of foreign nationals from Libya by sea have continued:
- The frigate HMS Cumberland that picked up more than 200 people in Benghazi arrived in Malta in the early hours of Saturday
- A US-chartered ferry carrying Americans evacuated from Libya arrived in Malta on Friday evening
- Britain has sent a second ship, the destroyer HMS York, to deploy to the sea area near Libya
- India is sending warships to the region to evacuate its nationals
Hundreds of sub-Saharan Africans are said to be fleeing southern Libya into Niger. Many more are stranded in Libya, where they say they are being attacked by people accusing them of being mercenaries fighting for Col Gaddafi.