Forces loyal to renegade General Khalifa Haftar are in control of Sirte, the birthplace of former ruler Muammar Gaddafi.
The self-styled Libyan National Army fighters took control of the coastal city late on Monday. Sirte had been under the control of the Tripoli-based government since 2016.
Forces loyal to the internationally recognised Government of National Accord said they withdrew from Sirte to avoid civilian casualties.
The city of 120,000 is a strategic asset for Haftar, whose administration is based in Benghazi. It sits just west of important oil terminals also controlled by his forces. It is also located on supply routes between eastern, western and southern Libya.
Haftar, who is backed by Egypt, the United Arab Emirates and some European countries is keen to amass more territory before Turkish troops arrive to help the rival administration in Tripoli.