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NATO operations were likely to continue as "they can't continue to have the level of fighting that they have there."
An AFP reporter said there was regular fire from National Transitional Council (NTC) tanks just outside Sirte late on Tuesday.
"Obviously there continues to be fighting by Sirte, by other areas" and "we still don't know where Kadhafi is," Panetta said in Egypt.
But he said the conflict "certainly is moving in the right direction" and "a lot of progress has been made" since the NATO operation was launched in March.
The civilian exodus from Sirte comes as an NTC commander of forces besieging the other remaining loyalist bastion of Bani Walid said Kadhafi's son Seif al-Islam was directing the last stand in the desert oasis.
Vehicles crammed with families and piled high with possessions queued at the succession of checkpoints on the coastal highway out of Sirte to have their belongings searched and identities checked by suspicious NTC forces.
NTC fighters manning the checkpoints made no secret of their disdain for the residents of a city which was so privileged under the ousted regime and where loyalty to the ousted Kadhafis ran deep.
Farak Mussa, whose blue minivan was carrying his family of eight jammed in beside mattresses and suitcases, said he had held out for days for fear of the NTC fighters but the ferocity of the clashes finally made him take the chance.
"We were afraid to come out because they (Kadhafi loyalists) told us that the NTC would cut our throats. But we couldn't stay because of the bombing -- we had to take the risk. Why is NATO bombing us?" he asked.
The alliance said it carried out no strikes in Sirte on Monday, although its warplanes did strike two targets in the area the previous day.
There was fierce fighting on the front line on the western side of Sirte on Monday after what NTC forces said was a rocket and rocket-propelled grenade barrage against their positions by Kadhafi forces inside the city.
Salem Hamees, who was leaving with his extended family, said: "Our house was hit by a bomb. It destroyed three rooms. We were lucky we were in the other rooms.
"We don't know where it came from. The NATO bombing is scary. It is all scary. There is no difference between their bombs."
Both Mussa and Hamees said their vehicles had been repeatedly stopped and searched.
NTC fighter Mohammed Shahomi had little sympathy for the long line of frightened families waiting to be inspected.
"They are all Kadhafi loyalists," he said.
"You think they are leaving because they believe in the revolution? They are just scared."
The fleeing civilians all spoke of an increasingly desperate situation inside Sirte as food supplies ran out.
An International Committee of the Red Cross team managed to deliver some desperately needed medical supplies on Monday.
But the persistent exchanges prevented it from carrying out a more detailed assessment of the needs, the ICRC said.
"ICRC staff crossed the front line with a fully loaded truck from the west side of Sirte," the statement said.
"Fifty oxygen cylinders and other items required for hospital care were handed over to medical staff and representatives of civil society."
A Dutch nurse who had been working in Sirte's Ibn Sina hospital was also evacuated.
Team leader Hichem Khadraoui said: "The situation on the ground was very tense with ongoing fighting.
"Under such conditions, we had to limit ourselves -- after obtaining clearances from all the parties concerned -- to bringing in the most urgently needed humanitarian aid without further assessing needs. We hope to return soon."
Khadraoui had led a previous mission into Sirte on Saturday during which the hospital came under rocket fire when NTC fighters surrounded Kadhafi forces in a nearby showpiece conference centre.
NTC forces again shelled Kadhafi forces towards the city centre on Tuesday afternoon from positions south of the hospital and conference centre using tanks and an anti-tank gun, an AFP correspondent reported.
Outside Bani Walid, the other remaining diehard loyalist bastion 170 kilometres (100 miles) southeast of Tripoli, an NTC commander said Seif al-Islam, Kadhafi's best-known son, is leading the final stand inside the besieged oasis.
"We captured a general from the pro-Kadhafi brigades, and he said Seif al-Islam is in Bani Walid and directing military operations there," Adel Benyur told journalists.
Seif al-Islam, his father and Kadhafi's intelligence chief Abdullah al-Senussi are the subject of International Criminal Court war crimes arrest warrants for murder and persecution in the bloody uprising.
A delegation from Libya's southern neighbour Niger met NTC chief Mustafa Abdel Jalil in Benghazi on Tuesday. An AFP correspondent said the NTC gave the delegation a letter, but its contents are not known.
Another Kadhafi son, Saadi, is in Niger, but Niamey has no plans to send him home to face justice, Nigerien Prime Minister Brigi Rafini said on Thursday.
Global police agency Interpol had issued a notice warning to its member states -- which include Niger -- that Libya wants Saadi's arrest for alleged crimes while head of the country's football federation.
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An AFP reporter said there was regular fire from National Transitional Council (NTC) tanks just outside Sirte late on Tuesday.
"Obviously there continues to be fighting by Sirte, by other areas" and "we still don't know where Kadhafi is," Panetta said in Egypt.
But he said the conflict "certainly is moving in the right direction" and "a lot of progress has been made" since the NATO operation was launched in March.
The civilian exodus from Sirte comes as an NTC commander of forces besieging the other remaining loyalist bastion of Bani Walid said Kadhafi's son Seif al-Islam was directing the last stand in the desert oasis.
Vehicles crammed with families and piled high with possessions queued at the succession of checkpoints on the coastal highway out of Sirte to have their belongings searched and identities checked by suspicious NTC forces.
NTC fighters manning the checkpoints made no secret of their disdain for the residents of a city which was so privileged under the ousted regime and where loyalty to the ousted Kadhafis ran deep.
Farak Mussa, whose blue minivan was carrying his family of eight jammed in beside mattresses and suitcases, said he had held out for days for fear of the NTC fighters but the ferocity of the clashes finally made him take the chance.
"We were afraid to come out because they (Kadhafi loyalists) told us that the NTC would cut our throats. But we couldn't stay because of the bombing -- we had to take the risk. Why is NATO bombing us?" he asked.
The alliance said it carried out no strikes in Sirte on Monday, although its warplanes did strike two targets in the area the previous day.
There was fierce fighting on the front line on the western side of Sirte on Monday after what NTC forces said was a rocket and rocket-propelled grenade barrage against their positions by Kadhafi forces inside the city.
Salem Hamees, who was leaving with his extended family, said: "Our house was hit by a bomb. It destroyed three rooms. We were lucky we were in the other rooms.
"We don't know where it came from. The NATO bombing is scary. It is all scary. There is no difference between their bombs."
Both Mussa and Hamees said their vehicles had been repeatedly stopped and searched.
NTC fighter Mohammed Shahomi had little sympathy for the long line of frightened families waiting to be inspected.
"They are all Kadhafi loyalists," he said.
"You think they are leaving because they believe in the revolution? They are just scared."
The fleeing civilians all spoke of an increasingly desperate situation inside Sirte as food supplies ran out.
An International Committee of the Red Cross team managed to deliver some desperately needed medical supplies on Monday.
But the persistent exchanges prevented it from carrying out a more detailed assessment of the needs, the ICRC said.
"ICRC staff crossed the front line with a fully loaded truck from the west side of Sirte," the statement said.
"Fifty oxygen cylinders and other items required for hospital care were handed over to medical staff and representatives of civil society."
A Dutch nurse who had been working in Sirte's Ibn Sina hospital was also evacuated.
Team leader Hichem Khadraoui said: "The situation on the ground was very tense with ongoing fighting.
"Under such conditions, we had to limit ourselves -- after obtaining clearances from all the parties concerned -- to bringing in the most urgently needed humanitarian aid without further assessing needs. We hope to return soon."
Khadraoui had led a previous mission into Sirte on Saturday during which the hospital came under rocket fire when NTC fighters surrounded Kadhafi forces in a nearby showpiece conference centre.
NTC forces again shelled Kadhafi forces towards the city centre on Tuesday afternoon from positions south of the hospital and conference centre using tanks and an anti-tank gun, an AFP correspondent reported.
Outside Bani Walid, the other remaining diehard loyalist bastion 170 kilometres (100 miles) southeast of Tripoli, an NTC commander said Seif al-Islam, Kadhafi's best-known son, is leading the final stand inside the besieged oasis.
"We captured a general from the pro-Kadhafi brigades, and he said Seif al-Islam is in Bani Walid and directing military operations there," Adel Benyur told journalists.
Seif al-Islam, his father and Kadhafi's intelligence chief Abdullah al-Senussi are the subject of International Criminal Court war crimes arrest warrants for murder and persecution in the bloody uprising.
A delegation from Libya's southern neighbour Niger met NTC chief Mustafa Abdel Jalil in Benghazi on Tuesday. An AFP correspondent said the NTC gave the delegation a letter, but its contents are not known.
Another Kadhafi son, Saadi, is in Niger, but Niamey has no plans to send him home to face justice, Nigerien Prime Minister Brigi Rafini said on Thursday.
Global police agency Interpol had issued a notice warning to its member states -- which include Niger -- that Libya wants Saadi's arrest for alleged crimes while head of the country's football federation.
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