Italy said tonight that Muammar Gadafy had very likely left the Libyan capital and was probably wounded by Nato air strikes.
Tripoli immediately dismissed the report as "nonsense".
Italian foreign minister Franco Frattini said he heard the report on Col Gadafy from the bishop of Tripoli, Giovanni Innocenzo Martinelli.
"I tend to give credence to the comment of the bishop of Tripoli, Monsignor Martinelli, who has been in close contact over recent weeks, when he told us that Gadafy is very probably outside Tripoli and is probably also wounded. We don't know where or how," Mr Frattini said.
Libyan state television later carried brief audio remarks attributed to Col Gadafy.
"I tell the cowardly crusader (Nato) that I live in a place they cannot reach and where you cannot kill me .... I live in the hearts of the millions," said the voice, which sounded like Col Gadafy. There was no accompanying video.
He also said he was making the statement after receiving a "massive" number of calls asking about his condition following a Nato air strike on his compound yesterday.
Nato allies including the US, Britain and France are bombing Libya as part of a UN mandate to protect civilians and they say they will not stop until the Libyan leader's 41-year rule ends.
Col Gadafy faces a three-month-old uprising by rebels who control Benghazi and the oil-producing east of the country.
The government accuses the rebels of being armed criminals and supporters of al Qaeda and says Nato air strikes are an act of colonial aggression.
There was no independent confirmation of Mr Frattini's report. The Libyan government poured scorn on it.
"It's nonsense," Libyan government spokesman Mussa Ibrahim said in Tripoli. "The leader is in high morale. He's in good spirits. He is leading the country day by day. He hasn't been harmed at all."
The insurgents were to meet senior White House officials in Washington today to seek cash and diplomatic legitimacy in their battle. Rebels are also making a plea for funds they say will help them cling on to besieged positions on the ground.
Libyan state television said a Nato strike on the eastern city of Brega ha today killed at least 16 civilians and wounded up to 40. It showed footage of at least nine bodies with multiple wounds, wrapped in blankets at an unknown location.
A Nato official in Naples said they did not have any information on the report.
Missile strikes by Col Gadafy’s forces stationed in positions around the rebel-held city of Misrata killed 10 and injured 20, a doctor said.
"Five homes were destroyed, two babies were killed. Their mother was injured and their 4-year-old sister is being operated on now and risks amputation of one of her legs," the doctor, who gave his name as Khalid, said by telephone from Misrata.
His account could not be independently verified.
Col Gadafy's forces have been pushed out of the port city since rebels seized the airport this week but Misrata is vulnerable to missile attacks from the east and west, he said. "The danger we face now is rockets fired from far out, 25 km or further."
The rebels want Washington to help free up some $180 million in frozen Gadafy assets to fund their campaign. Yesterday, rebel council chairman Mustafa Abdel Jalil secured a promise of more aid from Britain.
"To those who stand behind Gadafy they must know his regime is ending. There is no place for Muammar Gadafy in Libya's future," Jalil told Al Arabiya, pledging amnesty to anyone who defects from Col Gadafy's side.
The war has forced thousands of Libyans to flee, many across perilous waters. Migrants trying to escape by sea have a one in 10 chance of dying in a Mediterranean crossing in appalling conditions on overcrowded, unseaworthy boats, the UN refugee agency said.
Around 12,000 migrants have arrived at reception centres in Malta and Italy, while an estimated 1,200 are missing, presumed dead.
Col Gadafy, who took power in a 1969 coup and says he has the backing of his people, has refused to step down. The insurgents say they do not trust his offers of a cease-fire.
Reuters