Sheik Yusuf Qaradawi, head of the International Union for Muslim Scholars, issued a fatwa on live television, urging the Libyan army to kill Gadhafi, the Los Angeles Times reported.
"It is not heroism to fight your people and to hit them with missiles," Qaradawi said on al-Jazeera.
"I say to my brothers and sons who are soldiers and officers in the Libyan Army to disobey when (the government) gives orders to kill the people using warplanes," the cleric said. "I now issue a fatwa urging officers and soldiers who can to kill" Moammar Gadhafi.
"Shoot him down and relieve the people and the country of his burden," he added. "This man wants to annihilate the people."
While Gadhafi spoke to supporters, witnesses described the capital city as a war zone, The New York Times reported, with protesters in several neighborhoods trying to barricade the streets with scrap metal and other debris.
Beyond the makeshift barricades, militias and Bedouin tribesmen defending Gadhafi were stationed at intersections around the city, many lugging assault rifles, witnesses said. An antiaircraft weapon was set up in front of the state television headquarters.
"It is extremely tense," one witness told the Times.
Meanwhile, Libyan Ambassador to the United States Ali Aujali joined a list of Libyan diplomats and officials who have called on Gadhafi to end his 40-year regime, CNN reported.
The U.N. Security Council met Tuesday in New York in its first meeting since protests began washing over Arab countries weeks ago. The Arab League also called an emergency meeting.
Ibrahim Dabbashi, Libya's deputy ambassador to the United Nations, called on the international body to take steps, such as blocking airspace over Tripoli, to keep his government from reinforcing the military. He accused Gadhafi of carrying out "genocide."
Dabbashi said the death toll may be as high as 800. Human Rights Watch said at least 233 people have been killed during the unrest. CNN said its investigation corroborates the Human Rights Watch report.
Witnesses told CNN they saw helicopter gunships fired into crowds of protesters, a charge Libya's government denied. Gadhafi's second-oldest son, Saif al-Islam Gadhafi, told the state news agency al-Jamahirya the warplanes were targeting weapons depots in remote areas.
Security forces blocked the Fashloom area of Tripoli and were shooting anyone on the streets, including people trying to retrieve bodies, Mohamed Abdallah, a spokesman for the National Front for the Salvation of Libya opposition group, told CNN. Abdallah said he receive the information from witnesses in the area.
The unrest has gone on for nearly a week, driven by protesters demanding freedom and denouncing high unemployment under more than four decades of Gadhafi rule.
Witnesses said some of the warplanes dropped "small bombs," The New York Times reported.
"It was an obscene amount of gunfire," a witness told the Times. "They were strafing these people. People were running in every direction."
Other witnesses reported massacres in two Tripoli neighborhoods and ground troops shooting live rounds and tear gas to regain control of the city's main square.
Special-forces troops and mercenaries patrolled the streets in trucks, shooting freely as police stood by and watched, witness said.
The full scope of the turmoil was impossible to verify because authorities denied access to foreign journalists. Internet and phone access was mostly cut off, although some protesters said they used satellite connections and other countries' phone services to communicate.
Protests weren't limited to within Libya's borders. About 250 protesters rushed the Libyan Embassy in Kuala Lumpur, Malaysia, Tuesday, calling for Gadhafi to step down, an embassy official told CNN. The official said the protests were relatively peaceful and embassy security let the protesters stay for two hours.
While Gadhafi, 68, asserted he was in control, Libyan government officials began defecting. Libya's ambassadors in China, India, Britain, Indonesia, Bangladesh and Poland resigned. The staff at the Libyan Embassy in Sweden also resigned.
Libya's representative to the Arab League, Abdel Moneim Honi, quit his post and sided with protesters, telling reporters he was "joining the revolution," Egypt's Middle East News Agency reported.
Libya's top judicial official, Mustafa Abduljelil, resigned as well to protest Gadhafi's "excessive use of violence," the privately owned Libyan newspaper Quryna reported.
Two Libyan fighter pilots ordered to bomb protesters changed course and defected to Malta, Maltese government officials.
Police in several cities switched sides. Several powerful tribal leaders also defected. One tribe threatened to stop pumping oil if violence against protesters continued.
Meanwhile, protesters took control of the Libyan city of Gharyan and destroyed statues of Gadhafi, independent Libyan news Web site al-Manara reported. Protesters also seized the city of Meslala, where the police station was set afire.
The U.S. State Department ordered non-essential U.S. Embassy personnel and family members to leave Libya and advised Americans to delay travel to the country.
U.S. Ambassador Gene Cretz left Tripoli in December amid concerns for his safety because of WikiLeaks cables in which he described Gadhafi as exhibiting increasingly erratic behavior, a U.S. official told the Los Angeles Times.
In Washington, Secretary of State Hillary Clinton urged Libya "to stop this unacceptable bloodshed."