At least 13 people are reported to have been killed when a coalition plane flying over Libya fired on a rebel convoy between Brega and Ajdabiya on Friday, the rebels say.
Doctors at a hospital in Ajdabiya told the BBC that three medical students were among the dead.
Nato said it was looking into the incident but that it was very difficult to verify details about what happened.
The attack came after rebels reportedly fired an anti-aircraft gun.
Meanwhile, Libya's government rejected a rebel ceasefire offer. Spokesman Moussa Ibrahim dismissed the idea as "mad".
Troops loyal to Col Muammar Gaddafi would never withdraw from the rebel-held cities they were besieging, he said.
He also condemned recent coalition air strikes as "a crime against humanity" and said there had been civilian casualties in one attack on Thursday.
Vehicles destroyed
The rebels were on their way to Brega when they fired into the air with an anti-aircraft gun, the BBC's Nick Springate reported from the scene of the attack.
The rebel convoy was on its way to the front line near Brega when the attack took place The road to the front line is riddled with holes caused by what looks like a Nato A10 aircraft, our correspondent says.
On either side of the road are the remains of four pick-up trucks and one ambulance as well as the graves of those killed in the attack, he adds.
The attack is thought to have happened between 2300 and midnight local time. There is very little clarity surrounding the incident, but an anti-aircraft gun may have been fired in celebration, our correspondent says.
A coalition plane then opened fire on the convoy, destroying the five vehicles, the rebels said.
Nato said it regretted any loss of civilian life.
"Nato jets are in the sky over Libya because they are enforcing the no fly zone, the UN mandate to protect civilians," Oana Lungescu told the BBC.
But she added: "If someone fires against our aircraft they have the right to respond, they are enforcing a no fly zone. Any anti-aircraft guns would be acting against that."
On Friday, the head of the rebel Transitional National Council, Abdul Jalil Ibrahim, discussed how a truce might come about after meeting UN special envoy Abdelilah al-Khatib in the eastern city of Benghazi.
"We have no objection to a ceasefire but on condition that Libyans in western cities have full freedom in expressing their views and also that the forces that are besieging the cities withdraw," he told reporters.
"Our main demand is the departure of Muammar Gaddafi and his sons from Libya. This is a demand we will not go back on."
Mr Abdul Jalil, who quit as justice minister in protest at the use of violence against demonstrators, also said he believed the coalition should begin arming the rebels despite the UN arms embargo on Libya.
The Libyan government spokesman, Moussa Ibrahim, said the rebel Transitional National Council's demands were "impossible"
"We think that if the international community wants to protect civilians according to the international resolutions, they should take the appropriate measures, which include giving the go ahead to arm the rebels," he added.
Moussa Ibrahim dismissed the offer of conditional ceasefire, describing the rebels as "tribal, violent, with no unified leadership, al-Qaeda links."
"The rebels never offered peace. They don't offer peace. They are making impossible demands."
"If this is not mad, I don't know what is," he added. "We will not leave our cities. We are the government, not them."
Mr Ibrahim also said six civilians had been killed by an "immoral" air strike in the eastern village of Zawia el Argobe, 15km (9 miles) from Brega.
"Some mad and criminal prime ministers and presidents of Europe are leading a crusade against an Arab Muslim nation," he told reporters in Tripoli. "Sounds familiar? It's a crime against humanity."
Shrapnel
A doctor in the town of Ajdabiya, Suleiman Refardi, told the BBC that on Wednesday the coalition air strike on Zawia el Argobe targeted a government convoy that included tanks, artillery and lorries carrying ammunition.
A direct hit on an ammunition truck and trailer sent a hail of shrapnel into nearby houses, he said.
Four of the dead were female, including three children from the same family, aged between 12 and 16. Three boys, aged between 14 and 20, were also killed.
Dr Refardi said he had spoken to the family of the girls who had been killed and "there was no anger" at the coalition forces.
"If these tanks had entered Ajdabiya, it would have been a massacre," he said. "They [the Libyan people] are expecting more than this, because they know the Gaddafi forces are using civilians as a shield."
Nato officials told the BBC they were making inquiries "down our operations chain to find out if indeed there is any information on the operation side that would support this claim".
