Islamic State jihadists have successfully taken over home city of former dictator Muammar Gaddafi called Sirte, in Libya, Reuters reports.

A witness, who is a standing guard at his frontline post, Libyan soldier Mohammed Abu Shager told reporters that the Islamic State militants were holed up with their heavy weaponry less than a kilometer away.

"Every night they open fire on us," said Abu Shebar, who with comrades on Sirte's western outskirts holds the last position of troops belonging to one of the two warring Libyan governments, the General National Congress, which controls the capital Tripoli and most of the west of the country.

"They are only active at night," he said, pointing to the militants' position in a house just down the road blocked by sandbags. He sleeps in a shed next to his firing positions were used tank shells litter the ground.

Reuters reports that Libya which has descended into near anarchy since NATO warplanes helped rebels overthrow Gaddafi in a 2011 civil war, is now the third big stronghold for the Sunni Islamist group, also known as ISIS or ISIL, which declared a Caliphate to rule over all Muslims from territory it holds in Syria and Iraq.

Islamic State fighters became a major force last year in Derna, a jihadi bastion in Libya's east, and quickly spread to the biggest eastern city Benghazi, where they have conducted suicide bombings on streets divided among armed factions.

By occupying Sirte over the past four months they have claimed a major city in the center of the country, astride the coastal highway that links the east and west.

They made their presence known to the world in February by kidnapping and beheading more than 20 Egyptian Christian oil workers on a beach and posting video on the Internet.

In Libya, the group deploys locally-recruited fighters, led by envoys sent from Syria and Iraq. Those include Libyans returned from fighting on Syrian and Iraqi frontlines, steeped in the group's ethos of extreme violence and permanent warfare between those it considers true Sunni Muslims and all others.

Their gains in Libya, just across the sea from Italy, are worrying European governments and north African neighbors. But so far Western countries, which are bombing Islamic State positions in Syria and Iraq, have steered clear of that sort of intervention in Libya.