Just one day after Moammar Gadhafi's fortress-like compound in Tripoli was overtaken by rebels, effectively destroying the symbol of his 42-year-old dictatorship, a $2-million bounty for the fugitive leader was announced on Wednesday.

The announcement of the bounty came as rebel fighters continued to search for the 69-year-old leader. According to White House spokesperson Josh Earnest, there was no indication that Gadhafi had left Libya despite the fact that rebel officials admitted that they could not find him.

"He might be in Sirte or any other place," Mahmoud Jibril, the leader of Libya's opposition government told The Associated Press from Paris after a meeting with French President Nicolas Sarkozy.

Sirte, about 400 kilometres from Tripoli, is Gadhafi's tribal hometown and is said to be one of the last bastions of support for him.

The search for Gadhafi comes as rebel fighters on Wednesday made their first move to extend their political rule to the entire country.

"Members of the council are now moving one by one from Benghazi to Tripoli," Mansour Seyf al-Nasr, the Libyan opposition's new ambassador to France, told AP.

During the protracted six-month civil war in the Middle Eastern country, opposition leaders had set up their interim administration, the National Transition Council, in the eastern city of Benghazi, which had fallen under rebel control in February.

But despite the opposition's political gain, streets in Tripoli were far from being pacified on Wednesday as pro-regime snipers launched repeated attacks.

Rebel fighters came under fire at Gadhafi's Bab al-Aziziya compound. As of Wednesday morning, the rebels said they controlled most, but not all of its grounds.

Incoming shells and sniper bullets fired from the adjacent Abu Salim neighbourhood kept rebel fighters in defensive positions behind the walls of the compound. The rebels returned fire with rifles and rocket-propelled grenades.

"There are also civilians in those buildings who support Gadhafi and they too are firing on us," said rebel fighter Mohammed Amin.

Abu Salim is believed to be one of the remaining regime strongholds in the Libyan capital. Amin said rebels have surrounded the neighbourhood, but have so far been unable to push into its core. He said Gadhafi troops kidnapped four rebels from the area nearby and killed another fighter on Wednesday morning.

While the rebels claim to control some 80 per cent of the capital, they are also facing resistance in the area surrounding the Tripoli airport. Associated Press reporters say the road leading to the airport has been closed because of heavy fire from regime snipers.

Many streets in Tripoli were empty Wednesday, with the exception of the rebel checkpoints where cars are stopped and searched for weapons and signs of support for the Gadhafi regime.

Despite the resistance seen in Tripoli on Wednesday, the rebels have made enough gains to convince fellow Libyans that the tide is turning against the Gadhafi regime.

CTV's South Asia Bureau Chief Janis Mackey Frayer said large numbers of Libyans who fled the country after the rebel uprising earlier this year have begun returning home.

"Having crossed the border from Tunisia into Libya, we saw a number of Libyans who are lining up at the border waiting to come back," Mackey Frayer told CTV's Canada AM in a telephone interview.

"Many of them are heading back to Zawiya, a place that saw a lot of fighting and a lot of bloodshed over the last number of months. So people feeling like the situation is safe enough that they can go home."

Gadhafi vows to fight to 'victory or death'

Gadhafi may not have been physically present for the fighting at Bab al-Aziziya, but the absent dictator made it clear that he is not intending to surrender any time soon.

In an audio message broadcast Wednesday, Gadhafi revealed that he had fled Bab al-Aziziya in a "tactical move," after NATO pounded the compound with dozens of airstrikes and rendered it useless. He did not reveal his present location.

The Libyan leader used the same audio interview broadcast on Al-Ouroba TV to urge his supporters and residents of Tripoli to free the capital from the "devils and traitors" who have overrun it.

Gadhafi, whose regime has lasted for more than four decades, said he would fight "the aggression with all strength until either victory or death."

Christian Leuprecht of the Royal Military College of Canada said Wednesday that a decision to keep on fighting could be the best move that Gadhafi could make.

Leuprecht told CTV's Canada AM that Gadhafi is likely looking over his shoulder, well aware of the repercussions if he is caught.

"He doesn't have a lot of good options left," Leuprecht said in an interview from Kingston, Ont.

If captured, Gadhafi could face justice in front of a military court or a jury of fellow Libyans. He could even be handed over to the International Criminal Court, which issued a warrant for his arrest earlier this summer.

"His best bet is probably to hide out somewhere in Libya and let's not forget that he continues to have substantial support among his tribe, especially in areas such as Sirte," said Leuprecht, referring to Gadhafi's hometown on the Mediterranean coast southeast of Tripoli.

But Leuprecht said it would be difficult for Gadhafi to travel there without crossing a rebel checkpoint, or without NATO catching on to his movements.

"He could try to get to Sirte and by boat get to a place like Nicaragua, Angola, Zimbabwe, but his more likely chance is that he'll probably try to hide out," Leuprecht said.

With files from The Associated Press