A defiant Muammar Gaddafi has threatened to carry out attacks in Europe against "homes, offices, families", unless Nato halts its campaign of airstrikes against his regime in Libya.

The Libyan leader, sought by the International Criminal Court for a brutal crackdown on anti-government protesters, delivered the warning in a telephone message played to thousands of supporters gathered in the main square of the capital Tripoli.

It was one of the largest pro-government rallies in recent months, signalling that Gaddafi can still muster significant support.

A green cloth, several hundred meters long and held aloft by supporters, snaked above the crowd filling Tripoli's Green Square. Green is Libya's national colour.

A series of powerful explosions later rattled the heart of the capital, apparently new Nato airstrikes, as Gaddafi supporters cheered, honked horns and fired into the air in the street. Black smoke could be seen rising from the area near Gaddafi's Bab al-Aziziya compound.

Gaddafi spoke from an unknown location in a likely sign of concern over his safety. Addressing the West, he warned that Libyans might take revenge for Nato bombings.

"These people (the Libyans) are able to one day take this battle ... to Europe, to target your homes, offices, families, which would become legitimate military targets, like you have targeted our homes," he said.

"We can decide to treat you in a similar way," he said of the Europeans. "If we decide to, we are able to move to Europe like locusts, like bees. We advise you to retreat before you are dealt a disaster."

It was not immediately clear whether Gaddafi could make good on such threats.

In the past, Gaddafi supported various militant groups, including the IRA and several Palestinian factions, while Libyan agents were blamed for attacks in Europe, including a Berlin disco bombing in 1986 and the downing of Pan Am Flight 103 over Lockerbie, Scotland, that killed 270 people, mostly Americans. Libya later acknowledged responsibility for Lockerbie.

In recent years, however, Gaddafi was believed to have severed his ties with extremist groups when he moved to reconcile with Europe and the United States.

Al-Qa'ida and other jihadi groups have opposed Gaddafi since he cracked down in the late 1990s on the Islamist Libyan Islamic Fighting Group which sought to replace his regime with an Islamic state.

US Secretary of State Hillary Rodham Clinton responded by saying "Instead of issuing threats, he should be putting the well-being and interests of his own people first. He should step down from power."

Appearing alongside Spanish Foreign Minister Trinidad Jimenez at a news conference in Madrid, Clinton said Gadhafi must end military operations. She insisted that NATO's mission to protect civilians was on track and that the pressure on Gaddafi to cede power was mounting.

"The rebels are gaining strength and momentum," Clinton said. "We need to see this through."

Jimenez said Gaddafi's threats wouldn't diminish Spain's resolve.

"We will continue exerting the same military and political pressure," she said, "to protect Libyan citizens from the threat and the use of military violence by Colonel Gaddafi."

Asked about the opposition by some African leaders to the international arrest warrant against Gaddafi, his son Seif al-Islam and Libya's intelligence chief, Clinton noted that the referral for action came in a United Nations resolution. Nigeria, Gabon and South Africa, the three African members of the Security Council, voted in favour, she noted.