A "cacophony of celebration" could be heard in Tripoli as ships and cars blasted their horns and shots were fired into the air, said CNN's Dan Rivers.
"It is very, very loud -- a lot of excitement," Rivers said.
"It's a great moment," said Mahmoud Shammam, information minister for Libya's National Transitional Council. "I've been waiting for this moment for decades, and I'm thanking God that I'm alive to see this moment."
The sound of cheering could be heard, along with a call to prayer, as people embraced and jumped up and down joyfully and crowds ran through the streets alongside cars.
While reports of Gadhafi's fate were unconfirmed earlier Thursday, "what isn't speculation is what's going on down here," Rivers said.
Outside a hotel, staff including chefs wearing their white hats gathered, dancing and waving Libyan flags.
"They're breathing a huge sigh of relief here," Rivers said. Many Libyans were concerned that a free Gadhafi might play a role in destabilizing Libya in the future, he said.
In Sirte -- Gadhafi's hometown -- video showed people gathering in celebration, some riding on the tops of cars waving Libyan flags and shooting guns in the air as horns honked.
One man, dressed in fatigues and carrying a weapon, ran up and kissed a television camera. Others chanted, danced and waved their hands in the air, some flashing the "peace" sign.
Libyan television networks displayed a cell phone photo released by Agence France-Presse showing a bloodied man identified as Gadhafi.
On Wednesday, Libyan fighters said they had entered the last holdout of Gadhafi loyalists in Sirte. The NTC said it would officially declare Libya liberated when Sirte fell.
Many had suspected Gadhafi was hiding in Sirte after revolutionary forces took Tripoli in August. He was wanted by the International Criminal Court in The Hague, Netherlands, for alleged crimes against humanity and had not been seen in public in months.
Social media sites such as Twitter showed users expressing support for the Libyans and noting that Gadhafi's death would be another victory in a year that has seen the ouster of former Egyptian President Hosni Mubarak and former Tunisian President Zine El Abidine Ben Ali and the death of Osama bin Laden. Those from countries that participated in the so-called Arab Spring issued messages of support for Libyans.
