A "cacophany 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 Shaaman, 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."
Video from the capital showed some cars parked on a Tripoli street as people and troops milled about. Others were behind the wheel, shouting out of their windows. The sound of cheering could be heard, along with a call to prayer, as people embraced and jumped up and down.
While reports of Gadhafi's fate may be speculation, "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 Gadhafi might disappear if he were not captured and might play a role in destabilizing Libya in the future, he said.
In the city of Sirte -- Gadhafi's hometown -- video showed people gathering in celebration, some riding on the tops of cars waving the Libyan flag 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.
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 falls.
Many believed Gadhafi was hiding in Sirte after rebel forces took Tripoli in August. He is wanted by the International Criminal Court in The Hague, Netherlands, for alleged crimes against humanity and has not been seen in public in months. Social media sites like Twitter showed many users expressing support for the Libyans and noting that if Gadhafi is captured, it would be another victory in a year that has seen the ouster of former Egyptian President Hosni Mubarak and former Tunisian President Zine El Abedine Ben Ali and the death of Osama bin Laden. Many users from countries that participated in the so-called Arab Spring issued messages of support for Libyans.