However, Prime Minister Al-Baghdadi Ali Al-Mahmoudi later appeared to question the potential concession, telling reporters: "I would like to correct (that) and say that the leader of the revolution is not concerned by any referendum."
He added that there was no reason for the Libyan leader to step down in any case because he had not held any political or administrative role since 1977.
Qaddafi's son Saif Al-Islam told Italian newspaper Corriere della Sera: "They (elections) could be held within three months. At the maximum by the end of the year, and the guarantee of transparency could be the presence of international observers."
He said his father would be ready to step aside if he lost the election though he would not go into exile.
The proposal, which follows a series of concessions offered by the Libyan leader that Western powers have dismissed as ploys, comes at a time when frustration is mounting in some NATO states at the progress of the military campaign.
Four months into Libya's conflict, opposition advances toward Tripoli are slow at best, while weeks of NATO airstrikes pounding Qaddafi's compound and other targets have failed to end his 41-year-old rule over the oil-producing country.
The opposition leadership in the eastern stronghold of Benghazi dismissed the election offer as "wasting our time". "Saif Al-Islam is not in a position to offer elections. Libya will have free elections and democracy but the Qaddafi family has no role to play in this process," Jalal El-Gallal, an opposition spokesman, said.
An envoy leading Russian efforts to find a solution to the conflict said after talks with senior Libyan officials in Tripoli that Qaddafi's administration was not prepared to contemplate his departure.
But the envoy, Mikhail Margelov, said his task was to soften that position through negotiation. "I can say that today I am a cautious optimist regarding the resolution of the Libyan crisis," Russia's Interfax news agency quoted Margelov as saying.
Russia’s envoy Libya met with senior government leaders in Tripoli — but apparently not Qaddafi himself — hours after NATO warplanes pounded the area near the leader’s Bab Al-Aziziya compound.
Russian envoy Mikhail Margelov met in Tripoli with Al-Mahmoudi and Foreign Minister Abdul-Ati Al-Obeidi.
Last week, Margelov visited the Libyan rebel stronghold of Benghazi and said that Qaddafi has lost his legitimacy.
However, the envoy also said NATO airstrikes are not a solution to Libya’s violent stalemate.
Reporters taken to a bombing site around midday saw Margelov there in the company of government officials.
The Interfax agency quoted Margelov as saying, after meeting the foreign minister, that he was told “Qaddafi is not prepared to leave, and the Libyan leadership will talk about the country’s future only after a cease-fire.” The foreign minister also said, according to Margelov, that the African Union should be “the main force” in reaching a resolution.
Spain ordered the expulsion of the Libyan ambassador in Madrid, saying Qaddafi’s regime no longer has legitimacy. A Foreign Ministry statement Thursday said the government gave Ajeli Abdussalam Ali Breni 10 days to leave the country. Three other diplomatic staffers were also ordered out.
At least three NATO bombing runs shook the Libyan capital late Thursday. The targets were not immediately known and there was no report of casualties.
NATO launched its air campaign nearly three months ago under a United Nations resolution to protect civilians.
What started as a peaceful uprising inside the country against Qaddafi and his more than four-decade rule has become a civil war.
Fighting between government forces and the rebels had reached a stalemate until last week when NATO launched the heaviest bombardment of Qaddafi forces since the alliance took control of the skies over Libya.
Tunisian army official Mokhtar Ben Nasr said the number of Libyans fleeing has mounted in recent days, with 6,330 Libyan refugees crossing into Tunisia earlier this week.
Dozens of Libyan soldiers also have defected to Tunisia by boat, the state news agency there reported Wednesday.
A Tunisian official said a lieutenant colonel was the latest Libyan officer to desert Qaddafi’s army and flee across the border.
The official told The Associated Press Thursday that the officer took a desert road through the Sahara to cross the border near the town of Ben Guerdane, where he was stopped by a Tunisian national guard unit.
The officer told authorities that he wanted to join his family. They had earlier fled Libya for the Tunisian island of Djerba, the official said, speaking on condition of anonymity because he was not authorized to talk to the press.
In Washington, the White House insisted Wednesday that President Barack Obama has the authority to continue US
military action in Libya even without authorization from lawmakers in Congress.
Its 32-page report to Congress argues that because the US has a limited, supporting role in the NATO-led bombing campaign in Libya and American forces are not engaged in sustained fighting, the president is within his constitutional rights to direct the mission on his own.
The report appeared to do little to quell congressional criticism. A spokesman for House Speaker John Boehner, R-Ohio, said the White House was using “creative arguments” that raised additional questions.
