Interim government officials said one of Gadhafi's sons, his former national security adviser Muatassim, was also killed in Sirte and another, one-time heir apparent Seif al-Islam, was wounded and captured.
The 69-year-old Gadhafi is the first leader to be killed in the Arab Spring wave of popular uprisings that swept the Middle East, demanding the end of autocratic rulers and the establishment of greater democracy.
"We have been waiting for this moment for a long time. Moammar Gadhafi has been killed," Prime Minister Mahmoud Jibril told a news conference in the capital Tripoli.
His death decisively ends a regime that had turned Libya into an international pariah and ran the oil-rich nation by the whim and brutality of its notoriously eccentric leader. Libya stands on the cusp of a new era, but its turmoil may not be over. The former rebels who now rule are disorganized and face rebuilding a country virtually without institutions by Gadhafi's design. They have already shown signs of infighting, with divisions between geographical areas and Islamist and more secular ideologies.Libya's new leaders had said they would declare the country's "liberation" after the fall of Sirte.
President Obama said Gadhafi's death "marks the end of a long and painful chapter" for Libya. Vice President Joe Biden said the Libyan people had rid themselves of a dictator and have now "got a chance" with Gadhafi gone.
Footage aired on Arab TV networks showed Gadhafi was captured wounded but alive in Sirte. The goateed, balding Gadhafi is seen in a blood-soaked shirt, and his face bloodied. Standing upright, he is shoved along by a crowd of fighters on a Sirte roadside, chanting "God is great."
Gadhafi appears to struggle against them, stumbling and shouting as the fighters push him onto the hood of a pickup truck.
"We want him alive. We want him alive," one man shouts before Gadhafi is dragged away, some fighters pulling his hair, toward an ambulance. Later footage showed fighters rolling Gadhafi's lifeless body over on the pavement, stripped to the waist and a pool of blood under his head.
Amnesty International called on Libyan revolutionary fighters to make public the full facts of how Gadhafi died, saying all members of the former regime should be treated humanely. The London-based rights group said it was essential to conduct "a full, independent and impartial inquiry to establish the circumstances of Col. Gadhafi's death."
Out of initial confusion, a clearer picture began to emerge of Gadhafi's last hours, though there were still contradictions.
Most accounts agreed Gadhafi had been holed up with heavily armed supporters in the last few buildings held by regime loyalists in his Mediterranean coastal hometown of Sirte, furiously battling advancing revolutionary fighters.