As determined demonstrators against Gaddafi headed to the vast, palm-tree fringed Green Square in central Tripoli on Monday, protesters talked of the gathering as the "new Tahrir Square".

Inspired by Egypt's revolution, they vowed to sleep out in the centre of Libyan's Mediterranean port capital there until "the job was done" and the Libyan dictator had fled.

With the death toll estimated by Libyan rights groups to be more than 400 in five days, this seemed an almost impossibly dangerous challenge. But shocked by the scale of the violent repression of the protests, many felt they had nothing left to lose, according to exiled activists who described the scene.

With phonelines cut off all day, the internet connection patchy, and no foreign journalists allowed in, a news blackout on the ground disorientated residents who couldn't contact relatives. Reporters had to rely on accounts by human rights networks and exiled opposition activists.

But within hours, reports began to filter through about the deafening sound of military aircraft targeting demonstrators in what opposition groups warned was a "massacre". For the second night running, Gaddafi appeared to have deployed a shoot-to-kill policy to disperse the protests that had spread to the capital from the east of the country.

At least three people were killed in Tajura on the Tripoli's outskirts as military aircraft fired on protesters and bombed residential areas, according to one Libyan activist based in London who was in contact with Tripoli residents. Armed men in 4x4s were reportedly driving around the city amid sustained gun fire.

One Libyan activist said: "Gaddafi may be implementing his son's warning that if the Libyans don't just abandon their protests and accept his rule again he would give them a bloodbath. Will the world accept such behaviour from a government towards its people?".

The mood in Tripoli and its residential suburbs was tense and chaotic, according to accounts from residents. Some described locals barricading themselves into neighbourhoods or staying inside, afraid of foreign mercenaries paid by Gaddafi to shoot to kill. Since Sunday, some police stations had been set alight, the building where the General People's Congress, or parliament, meets was on fire on Monday morning, agencies reported.

"We can't trust anyone, there are armed mercenaries around us, ready to shoot us for no reason," one family told French radio. Some Tunisians who had fled the city described a nightmare atmosphere in Tripoli where shots were heard through Sunday night and again on Monday afternoon and people wouldn't leave their home for fear of clashes between pro-Gaddafi crowds and demonstrators.

Ali Zeidan, a senior member of the Libyan League of Human Rights who is in Munich, pieced together the pattern of violence in the Libyan capital that began early on Monday. "Protesters gathered for very big street demonstrations. Then at 3am, forces came without any warning and started shooting live ammunition into the crowd. Some of the demonstrators ran, others fell. There were about 60 killed and around 130 injured. It wasn't the police, it wasn't the army, it was Gaddafi's elite guard assisted by paid foreign African fighters," he told the Guardian.

"Then this morning Tripoli was eerily quiet. All shops, offices, pharmacies, banks were closed. It was as quiet as a Sunday in London 50 years ago."

He said all morning people had prepared for renewed protests on Monday evening in Green Square, with some people making the journey from outside Tripoli.

"Libyans used to be afraid. But after they saw the blood, they aren't afraid anymore, they are angry.

"Everybody knows somebody who has been killed or injured, everyone is very angry. What Gaddafi's son said made people furious, it's as if the people can just be treated like trash. Now people don't want to go back to what they had for the last 42 years [of Gaddafi's rule]. Now they feel no fear, if there are deaths people accept that we must carry on. Protesters will go to the centre again today and keep demonstrating until the job is done."

He added: "This is a new feeling for Libya: people look at their situation where there is no dignity for humans, no respect. The Libyan people are fed up, they are a patient, kind, quiet people, but now there's a feeling that to the outside world they aren't being respected as humans. There's a very strong feeling among young people: what do we have to live for? There's no life, no education, there's no jobs, no sport, no internet, no entertainment. What do we have? Nothing."

One demonstrator posted an account to the Alive in Libya website, describing the attacks on the crowd: "Heavy fire, like it was a war. Until you can't even hear or even see what's happening.

"The demonstrators scattered, and they suddenly brought in their gangs chanting 'Fatih' [One of Gaddafi's titles] and they re-entered the square. We took shelter in the neighbouring buildings for a while then retreated. There was also strikes by anti-aircraft missiles, we saw this in front of us. Those that I saw with my own eyes: two wounded, one shot in the head."

One young woman in Tripoli wrote by email to the Guardian: "The general sentiment here is mixed. One of hope, fear and excitement. Fear not of being hurt or shot but of the unknown. Hope for change. Excitement for what's to come. There is a complete blackout of information. Nothing official, nothing confirmed. Who's winning, how many are dead. Who's still here? Who's left running with their tail between their legs. The only source of information is that between each other."

In the east of Libya, where support for Gaddafi is traditionally weak, the city of Benghazi – where over 200 people are believed to have been killed in five days of violence – was said to have fallen to the protesters after police retreated. Residents were reported to be organising vigilante groups to protect themselves and distribute food. In Paris, the International Federation of Human Rights estimated the death toll at between 300 and 400 by Monday afternoon.

The group also reported soldiers in the east had defected and several towns were in the hands of the opposition. Tunisians who had left Libya described to Agence France-Presse how the disturbances had now reached the west of the country. In Zaouia, 35 miles (60km) west of Tripoli, a Tunisian hairdresser described how police had abandoned the town on Sunday after days of confrontation between pro- Gaddafi groups and protesters. Shops were closed, buildings had been attacked and burned and people had stolen police cars.

Souhayr Belhassen, head of the International Federation of Human Rights, said she had gathered accounts from Tunisians and others who had left Libya, describing how property belonging to Gaddafi had been attacked and police stations set alight. "The revolt is heading to the capital," she said. She said senior figures including ambassadors and security forces, were abandoning Gaddafi. "They have jumped ship and the boat is sinking," she said.