Benghazi, about 1,000 km (600 miles) from Tripoli, has been the main focus of the demonstrations against Col Gaddafi's 42-year rule.
Troops opened fire on people attending a funeral there on Saturday, killing 15, both the Associated Press news agency and al-Jazeera television said.
But an eyewitness told Reuters news agency that many more had actually died.
"Dozens were killed... not 15, dozens," the unnamed eyewitness said, adding that he had helped take victims to a local hospital.A Benghazi resident told the BBC that security forces inside a government compound had fired on protesters with mortars and 14.5mm machine guns - a heavy machine gun typically produced in the former USSR.
They were, he said, machine-gunning cars and people indiscriminately. "A lot [of people] have fallen down today," he added.
Other witnesses spoke of snipers firing at protesters from rooftops and there were widespread reports of foreign mercenaries from sub-Saharan Africa being brought in to attack protesters.
A doctor told the BBC that situation in the city was "like hell", saying he had been seeing people with gunshot wounds being carried into his hospital all day.
Conflicting reports are coming out of who controls the city, the military is said to be freely using violence and in full control, other reports say only the central military barracks are still in the military's hands. Either way, in the last few weeks North Africa has fully spiraled out of control now. If Qaddafi goes down like Mubarak and Ben Ali, all bets are off in the region.