But the US leader warned that the "UN mandate of civilian protection cannot be accomplished when Kadhafi remains in Libya directing his forces in acts of aggression against the Libyan people."
G8 leaders from Britain, Canada, France, Germany, Italy, Japan, Russia and the US called in their final statement for Kadhafi to step down after over 40 years, in the face of pro-democracy protests turned full-fledged armed revolt.
"Kadhafi and the Libyan government have failed to fulfil their responsibility to protect the Libyan population and have lost all legitimacy. He has no future in a free, democratic Libya. He must go," it said.
The Libyan regime responded saying any initiative to resolve the crisis would have to go through the African Union.
"The G8 is an economic summit. We are not concerned by its decisions," said Libya's deputy foreign minister Khaled Kaaim.
"We are an African country. Any initiative outside the AU framework will be rejected," he said.
Ahead of the summit, Russia -- which has criticised the NATO air war on Kadhafi's regime -- was seen as reluctant to take a hard line, but it too toughened its stance on Libya at the Deauville meeting.
"The world community does not see him as the Libyan leader," Russian President Dmitry Medvedev said, adding that Kadhafi's departure "would be useful for the country and the Libyan people."
Medvedev said Moscow had offered to mediate an end to the conflict and that the Kremlin would send senior African envoy Mikhail Margelov to the rebel bastion of Benghazi in eastern Libya "imminently".
The Kadhafi regime said it had no confirmation of a change in Russia's position.
"We have not been officially informed. We are in the process of contacting the Russian government to verify reports in the press," said Kaaim.
Arab League chief Amr Mussa said there was a yawning gap between Tripoli and the rebel National Transitional Council on Kadhafi's fate, with the rebels demanding he go immediately and the regime saving his exit for "later."
"Knowing the man, I don't think he's going to step down," he told journalists at Deauville.
Sarkozy said he had invited Cameron to visit Benghazi with him, while the British leader said the conflict was "entering a new phase."
"There are signs that the momentum against Kadhafi is really building. The regime is on the back foot," Cameron said, adding the deployment of British Apache gunships would help the military operation to protect civilians.
"President Sarkozy is always full of good ideas," Cameron chuckled, declining to confirm the invitation to visit Benghazi.
A Western diplomat, meanwhile, said Kadhafi has become increasingly paranoid about NATO air strikes and "appears to be moving from hospital to hospital, spending each night in a different one."
NATO also accused Kadhafi's forces of laying landmines in Misrata, the main rebel-held city in western Libya.
"This morning's reports showed that a minefield was laid in the Misrata area," Lieutenant General Charles Bouchard, the commander of the NATO mission in Libya, told a Brussels news conference.
"Anti-personnel landmines, in contravention to international law, had been laid in the Misrata area to prevent the population from moving," he said. "Mines do not make a difference whether it is a child or an adult."
Bouchard welcomed the arrival of four French attack helicopters and four British Apaches as particularly "timely."
The low-flying helicopters would allow NATO to conduct an "effective and aggressive" mission against Kadhafi's forces and make it easier to pinpoint vehicles involved in attacks against civilian populations, he said.
Rights groups, meanwhile, said Kadhafi's forces were indiscriminately attacking towns in the Nafusa mountains of western Libya, sending residents fleeing, with some being forced to live in caves.
On Thursday, the Libyan regime said Tripoli wanted a monitored ceasefire.
"We have asked the United Nations and the African Union to set a date and specific hours for a ceasefire, to send international observers and take the necessary measures" to end combat, Prime Minister Baghdadi al-Mahmudi said.
But NATO insisted it would keep up its air raids in Libya until Kadhafi's forces stop attacking civilians and until the regime's proposed ceasefire is matched by its actions on the ground.