In a message aired by state television, Gadhafi rallied supporters, telling Europe: "You don't know what you are going to face ... Our people are able in one day to move the battle to the Mediterranean and able to move the battle to Europe," CNN reported.
NATO has been conducting airstrikes in support of rebels demanding Gadhafi's ouster. The bombing started in March, ostensibly to prevent Gadhafi government troops from massacring civilians.
Rebels in the Nafusa mountain range in western Libya were less than 50 miles from Tripoli Thursday and were firing on government positions in the small town of Bir Ghanam with artillery and rockets, the Los Angeles Times reported Friday.
The rebels were aided by NATO warplanes -- including at least one Apache helicopter -- that struck Libyan forces three times.
Hundreds of anti-government protesters and civilians have been killed since efforts to oust Gadhafi began earlier this year.
"The power of Gadhafi doesn't depend on his weapons," Col. Mokhtar Milad Fernana, commander of rebel forces in western Libya, said Thursday. "He uses civilians as shields to protect himself."
Fernana said reports rebels received an arms shipment from France are incorrect.
"Whoever gave us these arms should come here and tell us where he put them," Fernana said.
RIA Novosti reported Friday NATO is likely preparing for a ground operation in Libya -- something not authorized by the U.N. resolution under which the airstrikes are being conducted.
"I think that now we are witnessing the preparation stage of a ground operation which NATO, or at least some of its members ... are ready to begin," said Dmitry Gogozin, a Russian envoy to the alliance.
"If direct weapons supplies to rebels indeed take place, they can only be referred to as a serious breach of the U.N. Security Council resolution," Rogozin said.