New regime troops captured Moamer Kadhafi on Thursday as they overran the last pocket of resistance from loyalists in his hometown Sirte, bringing their seven-month uprising to a triumphant conclusion.

Celebrations erupted in towns across Libya as news spread that the autocrat who ruled the country with an iron fist for 42 years was finally in custody.

"He has been captured," commander Mohamed Leith told AFP.

"He is badly wounded, but he is still breathing," Leith said, adding that he had seen Kadhafi himself and that he was wearing a khaki uniform and a turban.

Libyan TV channel "Libya lil Ahrar" carried the same news but a pro-Kadhafi television website insisted the ousted leader remained at liberty and AFP was independently able to confirm the capture..

"The reports peddled by the lackeys of NATO about the capture or death of the brother leader, Moamer Kadhafi, are baseless," said Al-Libiya television.

Kadhafi "is in good health," it insisted.

Ali Errishi, who served as Kadhafi's minister of immigration before defecting to the rebellion, said he was "confident" he was in custody.

"That is the end of a long ordeal of the Libyan people," he told the Al-Jazeera news channel.

NTC fighters who had fought in the bloody seven-month conflict that toppled the veteran despot at a cost of more than 25,000 lives, were jubilant at the news of his capture.

Pick-up trucks blaring out patriotic music criss-crossed the streets of Sirte, as fighters flashed V for victory signs and chanted Allahu Akbar (God is Greatest).

A lot of pickup trucks are playing the new national anthem and other revolutionary songs.

"I am happy we have got revenge for our people who suffered for all these years and for those who were killed in the revolution. Kadhafi is finished," said fighter Talar al-Kashmi.

Dutch Prime Minister Mark Rutte, whose country took part in the NATO-led air operation in Libya confirmed that Kadhafi was in custody.

"My assistant has just told me that Kadhafi really has been captured,' Rutte said. "I am glad that he has been captured."

Kadhafi is wanted by the International Criminal Court on charges of crimes against humanity by Libyan leaders have said they want him to be put on trial in his home country.

Russian President Dmitry Medvedev said: "The fate of Kadhafi should be decided by the Libyan people."

His capture came as new regime troops overran the last redoubt of his loyalists in Sirte, bringing to an end a two-month siege.

Fighters moving in from east and west overcame the last resistance in the city's Number Two residential neighbourhood where his diehard supporters had been holed up.

The defence minister in Kadhafi's ousted regime, Abu Bakr Yunis, was killed in the last battle, medics.

His body was identified at the field hospital where it was brought in a pick-up truck on Thursday, Dr Abdu Rauf told AFP.

"Sirte is free. The whole of Libya is free," said Khaled Ballam, field commander of the February 17 Brigade, which took part in the final assault.

"We had some clashes but there was no fierce resistance as many Kadhafi fighters were trying to escape rather than fight because they had no other option. The game is over."

Abdul Matlub Saleh, a fighter from the February 17 Brigade, said: "Every inch of the city is liberated. Our people are spread everywhere. There is no fighting. The gunfire that you are hearing is all celebrations."

An AFP correspondent heard sporadic gunfire in the neighbourhood during the morning as NTC fighters went house to house to root out the snipers who have inflicted heavy losses in their ranks in recent days.

Medics said that at least three NTC fighters were killed and 30 wounded on Thursday.

Seven NTC fighters were killed and 76 wounded on Wednesday, medics said. At least 11 NTC fighters were killed and 95 wounded on Tuesday.

The capture of Kadhafi and the fall of Sirte a milestone. Libya's new rulers had said that only once Sirte had fallen would they declare the country's liberation and begin the transition to an elected government.

In the end loyalist forces were limited to a tiny enclave of less than a square kilometre (0.4 square miles) which had been completely cut off by the besieging NTC forces who controlled the entire seafront of the Mediterranean coastal city as well as all of its landward sides.

NTC chief Mustafa Abdel Jalil said Libya's new rulers would compensate the wounded as well as the families of the more than 25,000 people killed during the eight-month uprising.

"Families of the martyrs, the wounded and the fighters themselves will be compensated," he said, urging Libyans to be patient, however, because of lack of funds.

Sirte once had 100,000 inhabitants, almost all of whom have fled. Fierce artillery battles and heavy gunfire over the past month have not left a single building intact, while looting has become commonplace as NTC fighters take their revenge on the Kadhafi bastion.

Among the few natives of Sirte in NTC ranks, anger at the destruction wreaked on their home city by their comrades runs deep.

"We are not happy about what has been happening in our city. It is the only city that is getting so much destruction," said Ibrahim Alazhry.