Rebels in Misrata, which came under heavy shelling yesterday from troops loyal to Colonel Gaddafi, claimed the dictator's forces had been using cluster bombs.
These pose a particular risk to civilians because they scatter small bomblets over a wide area.
Human Rights Watch also claimed the weapons were used, but Libyan government officials denied the accusations.
US secretary of state Hillary Clinton said the reports were "worrying", and "one of the reasons why the fight in Misrata is so difficult."
Human Rights Watch special adviser Fred Abrahams said it had "no doubt whatsoever" that cluster munitions had been used by regime forces and had photographic evidence that MAT-120 bombs were involved.
Libya has not signed up to an international ban on cluster bombs but Mr Abrahams said their indiscriminate nature meant they were nevertheless "a violation of the rule of war".
The MAT-120 fires 12 sub-munitions and has a high "dud rate", he told BBC Radio 4's Today programme, leaving children at danger of being blown up by unexploded ordnance.
"We have no doubt whatsoever. Photographs of the sub-munitions, photographs of the motor which carried the sub-munitions are on our website.
"We tracked the marking on those and they are very clearly the Spanish-produced MAT-120. We also interviewed ambulance drivers who explained seeing explosions that were very thoroughly consistent with cluster munitions. So we have no question."
It was reported today that Colonel Gaddafi's forces attacked Misrata with at least 100 Grad rockets this morning.