Recognition of Libyan rebels was announced by US Secretary of State Hillary Clinton at a meeting in Turkey of the International Contact Group on Libya on Friday.Attended by more than 30 countries and world bodies, the Istanbul Conference also agreed on a road map whereby Gaddafi should relinquish power and plans for Libya's transition to democracy under the rebel National Transitional Council, or TNC.
Western nations said they also planned to increase the military pressure on Gaddafi's forces to press him to give up power.
China and Russia were invited to the contact group meeting for the first time, but decided not to become involved.
In a speech on Friday evening broadcast, as thousands of his loyalists rallied in street demonstrations, Gaddafi rejected international recognition of the rebels.
“Trample on those recognitions, trample on them under your feet,” he told his supporters. “They are worthless.”
He said he enjoyed the support of millions of Libyans who yearned for death, martyrdom and suicide.
The U.N. Secretary General's Special Envoy to Libya, Abdul Elah al-Khatib, will be authorised to present terms for Gaddafi to leave power, but Britain said military action against Gaddafi would be stepped up at the same time.
The political package to be offered Gaddafi will include a ceasefire to halt fighting.
US officials said the decision to extend formal diplomatic recognition marked an important step towards unblocking more than $34 billion in Libyan assets in the US but cautioned it could take time to get cash flowing.