BENGHAZI, Libya—Supporters of Muammar Qaddafi fired on “Free Libya” forces on Sunday as they advanced on one of the last strongholds of the ousted leader, quashing hopes for a peaceful handover of the town, the rebel military spokesman said.

Col. Ahmed Omar Bani said on Sunday evening that operations to liberate the town of Bani Walid, southeast of the Libyan capital, Tripoli, could begin within hours, started by backers of the new National Transitional Council within the town.

Rebel forces surrounding the town will march in “to give congratulations,” he said, downplaying the likelihood of a bloody confrontation.

The Associated Press quoted rebel negotiator Abdullah Kanshil as saying that the talks had broken down after Moussa Ibrahim, Qaddafi’s chief spokesman and a top aide, had insisted the rebels put down their weapons before entering the town, some 140 kilometers southeast of Tripoli.

Rebel forces control most of the oil-rich North African nation and are already setting up a new government, but Qaddafi and his staunchest allies remain on the run and enjoy support in several central and southern areas, including Bani Walid and the fugitive leader’s hometown of Sirte.

The outcome of Sunday’s clash in the little-known town has taken on significance in part because at least two of Qaddafi’s sons, Seif al-Islam, 49, and Saadi, 38, were reported to be holed up there, and Qaddafi himself may have used it as a way station in what rebel officials have described as a southward escape. Bani also confirmed that a third son, Khamis, 28, had been killed in a checkpoint skirmish last week and was buried in Bani Walid.

Khamis had commanded the best-equipped brigade in the Libyan military, which used heavy artillery to attack rebels in major towns, including Tripoli, Benghazi and Zawiyah. The Transitional Council had reported his death twice before, but Bani said he was certain it had happened this time, because residents of the town told the council that they witnessed Khamis’s funeral. The spokesman last week had identified a second man killed in the same car as Abdullah Zanussi, Qaddafi’s brother-in-law, but he said in fact was Zanussi’s son, Mohamed.

Qaddafi’s own whereabouts are still unknown, and the military spokesman said he may have fled the country. Qaddafi had issued a series of threats to fight to the finish last week, but he hasn’t been heard from since Thursday. Transitional Council officials had last put him in Sabha, a town deep in the Sahara, and they predicted he would flee into land-locked Niger, one of the poorest countries in Africa.

Bani Walid is one of three towns singled out by the Transitional Council for military attack if they don’t surrender by Saturday. A clash was reported on Sunday near Sirte, Qaddafi’s hometown on the Mediterranean Sea, and there was no sign of a breakthrough in negotiations between the Transitional Council and tribal elders in Sirte.

There was also no sign that Sabha, the third town named in Saturday’s ultimatum, was about to surrender.