It will initially receive international donations. Blocked assets -- estimated to be worth $60 billion (40 billion euros) in Europe and the United States -- are to be used at a later date.
Italian Foreign Minister Franco Frattini, whose government hosted the meeting, said $250 million was already available in immediate humanitarian aid.
Wealthy Gulf states Kuwait and Qatar have pledged to be major donors.
The funds made available are far less than the figure of up to $3 billion dollars that had been sought by the rebels, but their leader, Mahmud Jibril, said "it's a good start."
Jibril said three billion dollars represent "a six-month budget."
French Foreign Minister Alain Juppe said the new fund could be up and running "within weeks."
However, he said it would take longer to tap Libyan government assets frozen abroad under UN sanctions to secure a longer-term credit line sought by the rebels, as unblocking the assets "poses legal problems."
Kadhafi's government was infuriated by the prospect of seeing funds it regards as its own being used to finance the rebels.
"Libya still, according to the international law, is one sovereign state and any use of the frozen assets, it's like piracy on the high seas," Deputy Foreign Minister Khaled Kaim said.
Kaim said there would be no let-up in the government's attempts to block off the maritime lifeline to the besieged city of Misrata -- the rebels' last bastion in the west.
"We will not allow those ships to bring arms to the city and then to evacuate some criminals," he said, after an International Organisation for Migration ship on Wednesday offloaded supplies and onloaded refugees at the city's port under shelling by Kadhafi forces.
Speaking in the rebel stronghold Benghazi, a Misrata representative on the rebels' National Transitional Council said the city was bracing for a ground assault by Kadhafi forces.
Suleiman Fortiya said loyalist troops were massing in Zliten, outside Misrata, with fighting going on there and in other suburban areas with many casualties on both sides.
"I am sure there will be a lot of fighting on the ground in the future. That is what Misrata is worried about because he (Kadhafi) is doing a big preparation to march on Misrata.
"This army will be coming from Zliten and most likely will come wearing civilian clothes."
A resident of Misrata contacted by telephone said there had been clashes on the outskirts of the city, including in Tumina suburb in the east, Tuya in the west, and Giran, about 20 kilometres to the south.
An aid worker said he had heard heavy artillery fire after midday coming from "deserted neighbourhoods" in the city but was unable to determine which ones exactly.
NATO said its warplanes had hit nine ammunition dumps, three tanks, and two rocket launchers around Zintan on Thursday in the western Djebel Nafoussa mountains, where a pocket of rebels are battling Kadhafi forces.
It said alliance jets also struck ammunition dumps, tanks and a communications facility in other areas of western Libya, which is mostly in the hands of loyalist forces.
Amnesty International said the government's two-month siege of Misrata, Libya's third largest city, might amount to a war crime.
"The scale of the relentless attacks that we have seen by Kadhafi forces to intimidate the residents of Misrata for more than two months is truly horrifying," said Amnesty senior adviser Donatella Rovera.
"It shows a total disregard for the lives of ordinary people and is in clear breach of international humanitarian law."
France announced it ordered 14 people who served as Libyan diplomats under Kadhafi's regime to leave the country within two days.
"France has declared persona non grata 14 Libyan ex-diplomats posted in France," the foreign ministry said, indicating Paris no longer recognised their diplomatic status.
The ministry accused them of "activities incompatible with the relevant UN resolutions... and contrary to the protection of Libyan civilians."
At the Rome meeting, US Secretary of State Hillary Clinton had called on the international community to do more to isolate Kadhafi's regime by expelling all diplomats loyal to him.
Britain ordered two Libyan envoys to leave London on Thursday. It had already expelled the ambassador.