A group of journalists, who had been invited to Al-Zawiyah by the Libyan government, witnessed thousands of anti-Kadhafi demonstrators gathering in streets and mounting barricades in the city centre.
No security forces were visible, according to reporters.
However, tanks are reported to be surrounding the town. Residents have been raiding military camps for weapons to defend themselves against a possible crackdown, locals told Al Jazeera television.
Kadhafi's opponents now claim to control almost all the east of the country.
Protestors in the opposition stronghold of Al-Baida have threatened to march on Tripoli, armed with weapons they claim to have seized from the army.
The capital remains under the control of Kadhafi's regime, with tanks patrolling the streets.
People are scared to go out into the streets for fear of being shot, residents told AFP news agency. Banks were open on Sunday but bread and petrol remain tightly rationed.
The authorities sent out text messages on Sunday urging people to take up the government's offer of a 400-dollar handout for every family.
Meanwhile people continue to flee the country in their thousands. Almost 100,000 people have crossed the border into Tunisia in the past week, according to the Red Crescent, which is warning of a humanitarian crisis.