A spokesman for Gaddafi told Reuters that the air strikes had hit a residential building and a hotel, but these reports could not be verified as the town has been largely cut off from communication.
Nato disputed the claim, saying it was aware of the allegations but that its targets were military.
"We are aware of these allegations," Colonel Roland Lavoie, spokesman for the western military alliance, said in Brussels. "It is not the first time such allegations have been made. Most often, they are revealed to be unfounded or inconclusive."
Gaddafi's spokesman, Moussa Ibrahim, claimed the former Libyan dictator was still in Libya and was personally directing the fighting in Sirte and in Bani Walid, another loyalist stronghold.
In a call from a satellite phone to the Reuters office in Tunis, he said: "Nato attacked the city of Sirte last night with more than 30 rockets directed at the city's main hotel and the Tamin building, which consists of more than 90 residential flats.
"The result is more than 354 dead and 89 still missing and almost 700 injured in one night." more