Efforts by insurgents to topple Muammar Gaddafi are in disarray after a senior Libyan opposition figure admitted that rebel soldiers were responsible for the murder of their most senior army commander.

The transitional government's oil minister said that General Abdel Fatah Younis had been shot dead by Islamist-linked militia within the anti-Gaddafi forces, provoking fears of future unrest and instability among those fighting the old regime. The revelation will raise doubts over the wisdom of the British government's decision last week officially to recognise the rebel transitional government, declaring that it had proved its democratic credentials.

Only a day later, the bullet-riddled and burnt bodies of Younis and two of his aides were found dumped on the outskirts of Benghazi, the rebel capital.

Labour's former defence secretary Bob Ainsworth said that the murder and the identities of the killers were evidence that the government had not thought through its policy in Libya.

"One of the biggest risk factors in this was our lack of understanding of the people we were working with and I think that lack of understanding still stands," he said.

Bob Stewart, the Tory MP and former British United Nations Commander in Bosnia, said he feared the Libyan conflict would end with "a government we don't like and us getting the blame".

Labour MP John McDonnell called for a peace conference between Gaddafi and the rebels to be enforced. "The government are treading on a path that is extremely uncertain," he said. "They are dealing with people of whom they have very little knowledge and this is just an example of the potential there is for disunity."

In Tripoli, Gaddafi's spokesman, Moussa Ibrahim, mocked British support for the rebels, declaring: "It is a nice slap [in] the face [for] the British that the [rebel] council that they recognised could not protect its own commander of the army."

He alleged that al-Qaida elements were behind the killing, stating that "by this act, al-Qaida wanted to mark out its presence and its influence in this region".

Former Liberal Democrat leader Lord Ashdown urged the government not to change its policy. "We are obviously not in the best place we could be, but this is what you have got to expect," he said. "If you want to do this according to international law, this is what it looks like. This is messy, this is unpleasant and inelegant to watch, but it is no worse than doing it ourselves."

Younis was killed in mysterious circumstances on Thursday. Initially, Mustafa Abdul Jalil, president of the National Transitional Council, the rebel's government, claimed the murder had been carried out by Gaddafi-linked forces

That was starkly contradicted by oil minister Ali Tarhouni who confirmed Younis had been killed by members of the Obaida Ibn Jarrah Brigade, a group linked to the rebels.

Tarhouni told reporters Younis was being brought back to Benghazi when he was shot. A militia leader who had gone to fetch him from the front line had been arrested and confessed that his subordinates had carried out the killing.

"It was not him. His lieutenants did it," Tarhouni said, adding that the killers were still at large. the Foreign Office was seeking confirmation from Jalil over the claim.

The authorities have yet to say where Younis was killed, or when, or how it was that his body vanished for 24 hours. Neither is it clear why he was being brought back to Benghazi.

Reports in rebel-controlled Libya also contradict the official version, with radio stations reporting that Younis was killed not on the road but after being kidnapped in a hotel room in the rebel capital and that the general had been under arrest that morning, accused of holding secret talks with Gaddafi regime officials.

Adding to the sense of crisis engulfing the rebels , Gaddafi launched his heaviest assault yet on the besieged city of Misrata using tanks, infantry and artillery against rebel front lines.

The commander of the frontline Hatin Brigade, Sedek Sheltad, saidseven fighters were dead and more than 50 wounded. "There is a big war now between the Gaddafi soldiers and the revolutionaries," he said. "The field hospital is full, there is no more space."

Nato has employed tactical bombing in all but name, but despite dozens of airstrikes around the oil town of Brega, and successive rebel assaults, government forces remain in control. The onset of Ramadan on Monday and its requirement to fast in daylight hours is likely to bring battlefield movement to a halt.