"Signals intelligence" indicated Gadhafi's regime was using a building disguised as an upscale villa in Tripoli, Libya's capital, to communicate with military units carrying out attacks on rebel-held areas, the senior NATO official told the Los Angeles Times.
Up to three missiles slammed into the building late Saturday after NATO received "clear indications from signals," the unidentified official said.
Libya said the missiles killed Gadhafi's 29-year-old son Saif Gadhafi and three grandchildren.
The grandchildren were identified to The New York Times by Gadhafi friends as the 4-year-old daughter of Gadhafi daughter Aisha Gadhafi, a 1-year old son of Gadhafi's oldest son, Mohammed Gadhafi, and a 2-year-old child of Gadhafi son Hannibal Gadhafi. The friends did not say if the last child was a boy or girl.
The victims' funerals were to be held Monday, the friends told the newspaper.
State TV Sunday showed a body identified as Saif Gadhafi covered in the green Libyan flag designed by the Gadhafi regime, with no face visible.
"Signals intelligence" involves intercepting personal and electronic communications, including from cellphones and e-mail. It can also involve code-breaking, since sensitive information is often encrypted, and "traffic analysis" to see who is communicating with whom and to what extent.
The NATO officer did not say what intelligence had been detected to tip off officials.
The attacked building "had been disguised as a residence but was really a C2 [command-and-control] bunker," the NATO officer, who spoke on condition of anonymity because he was discussing intelligence, told the Times Sunday.
"It just so happened certain folks were there," he said.
Purported Gadhafi supporters in Tripoli burned and vandalized the closed U.S., British and Italian embassies and ransacked U.N. buildings, forcing the evacuation of the 12 remaining international staff members to neighboring Tunisia, officials said.
A BBC report from Tripoli said the British Embassy was "completely burned out" by fire.
U.N. Secretary-General Ban Ki-moon had no comment on the airstrikes, which were authorized under a U.N. Security Council resolution to prevent troops loyal to Gadhafi from killing civilians in Libya's 2-month-old civil war.
British Prime Minister David Cameron told the BBC the airstrikes fell within the Security Council mandate to stop a "loss of civilian life by targeting Gadhafi's war-making machine."
British Foreign Secretary William Hague ordered Libyan Ambassador Omar Jelban to leave the country Monday for failing to protect diplomatic missions.
Hague said the Gadhafi regime had "once again breached its international responsibilities and obligations."
The Obama administration had no comment on the airstrikes but criticized the embassy attacks. State Department spokesman Mark Toner said Washington condemned the retaliation "in the strongest possible terms."
The Italian Foreign Ministry also condemned the "acts of vandalism," calling them "grave and vile."
Italy last week became the seventh NATO nation to take part in the Libyan bombing missions.