In the fighting, Gadhafi loyalists fired dozens of rockets at Misrata on Sunday, said the resident, despite claims by the Libyan government that the army has held its fire since Friday. The resident asked to be identified only by his given name, Abdel Salam, for fear of retribution.
At least 28 people have been killed and 85 wounded by fighting in the city Saturday and Sunday, said Dr. Khaled Abu Falgah, head of the Misrata medical committee.
"The last 24 hours have been one of the hardest and saddest days in the last 65 days," he said.
Libyan officials have said in the past two days that the military is pulling back in Misrata, ostensibly to enable tribal chiefs from the area to negotiate with the rebels. Late Saturday, Deputy Foreign Minister Khaled Kaim said troops remained in their positions in the city, but claimed they halted all activity.
Misrata, the only major rebel stronghold in Gadhafi-controlled western Libya, has become the most dramatic battleground in the Libyan uprising, which began in February after similar revolts in Tunisia and Egypt ousted longtime leaders. Fighting elsewhere in the country is at a stalemate, even with NATO airstrikes that began last month.
The rebels have defended positions around Misrata's seaport.
On Sunday, rebels took control of Misrata's main hospital, on Tripoli Street, clearing government troops out of their last position in the city center, said Abdel Salam. "Now Gadhafi's troops are on the outskirts of Misrata, using rocket launchers," he said.
A Misrata rebel, 37-year-old Lutfi, said there had been 300-400 Gadhafi fighters in the main hospital and in the surrounding area that were trying to melt into the local population.
"They are trying to run way," Lutfi said of the soldiers, speaking on condition of anonymity for fear of reprisals. "They are pretending to be civilians. They are putting on sportswear."
Thousands of people, many of them foreign workers, were stranded in Misrata during the fighting. Since last week, hundreds of migrants, along with wounded Libyans, have been evacuated in aid vessels through the port.
One of those wounded, Misrata resident Osama al-Shahmi, said Gadhafi's forces have been pounding the city with rockets.
"They have no mercy. They are pounding the city hard," said al-Shahmi after being evacuated from Misrata.
"Everyone in Misrata is convinced that the dictator must go," said al-Shahmi, 36, a construction company administrator who was wounded by shrapnel from a rocket. His right leg wrapped in bandages, al-Shahmi flashed a victory sign as he was wheeled on a gurney into a waiting ambulance upon arrival in the rebel stronghold of Benghazi.
In Washington, Sen. Lindsey Graham said NATO airstrikes should target Gadhafi's inner circle and military headquarters, adding that the quickest way to end a military stalemate is "to cut the head of the snake off."
Gadhafi "needs to wake up every day wondering, 'Will this my last?'" Graham, a Republican on the Senate Armed Services Committee, told CNN's "State of the Union."
NATO said a U.S. Predator drone destroyed a multiple rocket launcher Saturday in the Misrata area that was being used against civilians. The Pentagon said it was the first attack carried out in Libya by one of the drones, which began flying missions in the country last week.
"This Predator strike is a perfect example of the complex and fluid situation that NATO air forces are facing every day," said Rear Adm. Russ Harding, the operation's deputy commander.
He urged civilians to "distance themselves from Gadhafi regime forces, installations and equipment whenever possible so we can strike with greater success and with the minimum risk to civilians."
The SA-8 is a Soviet-built anti-aircraft system dating from the late 1970s. It was the first air defense missile vehicle to mount its own targeting radar.
NATO aircraft have so far conducted nearly 3,600 sorties, including 1,500 strike sorties.
Hubbard reported from Benghazi, Libya. Associated Press writer Slobodan Lekic in Brussels contributed reporting.