A Venezuelan peace gambit, proffered by one of the only world leaders who still admires Libya's dictator Moammar Gadhafi, was quickly rejected by rebels but aroused cautious interest in Washington.
"Any effort that is able to resolve this peacefully, you know - you know, deserves consideration," U.S. State Department spokesman P.J. Crowley said.
The Obama administration also signalled a willingness to accept exile for the ruthless Libyan dictator, although Colonel Gadhafi has vowed to fight to the last drop of Libyan blood rather than flee.
"His movement to a third country, that would be a major step toward resolving the current situation," Mr. Crowley said, adding "whether he would be welcome in Venezuela, obviously that''s a matter for Venezuela to determine."
Oil-rich Venezuela's President Hugo Chavez called for a multilateral commission to broker a truce between rebels, who have seized much of eastern Libya, including its biggest oil fields, and the embattled Col. Gadhafi, who has vowed to die a martyr's death.
"No one has told us a thing about it and we are not interested anyway," said Abdul Hafif Goga, spokesman for the rebels' nascent government set up in Benghazi, Libya's second city far to the east of the capital, Tripoli. ``We will never negotiate with him."
Joel Hirst, of the Council on Foreign Relations, said Col. Gadhafi is an ideological friend and ally of Mr. Chavez. They have stood together in difficult times "and now Chavez is reciprocating."
"It is unclear whether the Arab League or the UN will agree, given his clear bias in favour of Gadhafi."
Still, finding a way out for the increasingly unpredictable Libyan leader, who has been denounced as "delusional" by U.S. Secretary of State Hillary Clinton, may be the only alternative to a bloody showdown.
Being bluntly told to quit by U.S. President Barack Obama only seemed to enrage the Libyan dictator, who has ruled for 41 years.
"The violence must stop," Mr. Obama said Thursday.
"Moammar Gadhafi has lost legitimacy to lead and he must leave," Mr. Obama added, using the Libyan leader's name for the first time publicly since pro-democracy protests erupted in the sprawling, mostly desert nation of six million between Tunisian and Egypt, both of which have seen repressive rulers ousted in the wave of uprisings across the Arab world.
"Those who perpetrate violence against the Libyan people will be held accountable, and the aspirations of the Libyan people for freedom, democracy and dignity must be met," Mr. Obama added.
In one of his rambling and angry speeches earlier this week, Col. Gadhafi vowed to arm every Libyan and turn his nation into another Vietnam, a desert version of the Southeast Asian quagmire where 58,000 U.S. troops were killed.
Mr. Chavez has a long and close relationship with Col. Gadhafi. In 2009, he bestowed upon the Libyan leader - who sometimes styles himself as Africa's king of kings -Venezuela's highest honour, the Simon Bolivar award, and presented him with an ornate replica sword. In 2004, the Libyan leader had given Mr. Chavez his annual human-rights prize for battling "the effects of imperialism."
The Chavez gambit apparently would name former Brazilian president Luiz Inacio Lula da Silva as a special mediator, although it was unclear whether the Brazilian knew of the plan.
Arab League Secretary-General Amr Moussa, a former Egyptian foreign minister, said he was aware of the mediation proposal but did not know whether Col. Gadhafi had agreed to it.
However, Saif, one of Col. Gadhafi's sons, told a British television network that he knew nothing of the Chavez offer. "It is a nice gesture, but we can solve our problems, there is no need for foreign intervention," he said.
Mr. Obama gave no hint that he was considering military intervention despite the growing chorus of calls for U.S. warplanes to enforce a no-fly zone above Libya. He said he had ordered a range of military options to be prepared but so far the involvement of American naval vessels and military aircraft has been purely humanitarian. Mr. Obama said the tens of thousands of fleeing refugees stranded at the Tunisian-Libyan border represented "the biggest problem we have right now."
Direct U.S. intervention, even to bolster rebel forces, risks ruining America's chance of emerging on the right side of the current crisis transforming the Arab world, he said. Egyptians "felt that we hadn't tried to engineer or impose a particular outcome," Mr. Obama said. "The same is happening in Tunisia. I think the region will be watching carefully to make sure we are on the right side of history."