Mustafa Abdel Jalil, head of the Transitional National Council, said he supported the offer by Libyan businessmen for a reward of two million Libyan dinars to anyone handing over Gaddafi "dead or alive".
He also offered amnesty to "members of (Gaddafi's) close circle who kill him or capture him".
His comments came as some 35 journalists held at the Hotel Rixos in Tripoli were released by soldiers loyal to the 69-year-old dictator.
The hotel is reported to be one of the last buildings under the control of Gaddafi's forces. According to BBC correspondent Matthew Price, the situation deteriorated overnight when it became clear they could not leave of their own free will as two gunmen stalked the building, preventing the journalists from leaving.
Power cuts also meant they had not been able to watch on television as Gaddafi's compound was stormed.
"We had no idea that Tripoli was like this," he added.
"We wondered if our lives were at risk because of that, because we were seen as on one side of the conflict."
Earlier, jubilant rebel fighters swept through the capital following last night's successful siege of the despot's heavily-fortified Bab al-Aziziya compound.
After storming the luxury home, they raised the new Libyan flag over buildings and looted Gaddafi's personal possessions, including his famous colonel's hat - effectively ending the brutal 42-year regime.
And today, some of Gaddafi's closest allies in government appeared to be deserting him.
Abdul Ati al-Obeidi, Gaddafi's former foreign minister, told Channel 4 News that the regime had come to an end. Speaking from Tripoli, he said the rebels were now responsible for restoring law and order to Libya.
But Gaddafi was still resisting arrest as he went on the run. He said it was a "tactical" move to flee his base in Tripoli, adding that he had gone on a discreet tour of the Libyan capital and did not feel in danger.
As rebel fighters searched the city, the dictator told residents in a poor-quality telephone address on local television that they must "cleanse" Tripoli of his regime's enemies and free it from the "devils" who have overrun it.
Al-Orouba TV also broadcast what it said was a telephone interview with government spokesman Moussa Ibrahim, who said Libya would be turned into a "burning volcano and a fire under the feet of the invaders and their treacherous agents".
But Mr Hague said it was now time for Gaddafi to recognise defeat as Nicaragua apparently offered asylum to Gaddafi.
Speaking after he chaired a meeting of the National Security Council in London, Mr Hague said: "There is a clear, fundamental decisive rejection of the regime by the people of Libya.
"I think it is time now for Colonel Gaddafi to stop issuing delusional statements and recognise that that has happened, that control of the country is not going to return. He should be telling his dwindling remaining forces now to stand down."
The British Government is still also attempting to "pave the way for the unfreezing of assets" which "ultimately belong to the Libyan people", Mr Hague added.
French President Nicolas Sarkozy has instigated a "friends of Libya" conference in Paris, scheduled for next Thursday.
Mr Sarkozy said countries which took part in the campaign against Gaddafi were invited, along with China, Russia, India and Brazil, to discuss rebuilding the country.
In a statement, Downing Street said the conference was a joint Franco-British initiative.
"This will be an opportunity for the NTC to set out how the international community can help them on the path to establishing a free, democratic and inclusive Libya and for all those who wish to support Libya to discuss the role that they can play to support this," a spokesman said.
"We have stood firmly by the Libyan people since their uprisings began six months ago and we will continue to lead international efforts to help them achieve their aspirations in the weeks and months ahead."
According to the Daily Telegraph, soldiers from 22 SAS Regiment are helping to hunt for Gaddafi after receiving orders from Mr Cameron.
Defence sources told the newspaper the special forces soldiers have been in Libya for several weeks.
Dressed in Arab civilian clothing and carrying the same weapons as the rebels, the elite soldiers are now focusing their efforts on searching for the despot since his compound in Tripoli was successfully seized by the rebels.
A Ministry of Defence spokesman said the department never comments on special forces operations.
PA
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