A Misrata military council member, speaking on condition of anonymity, said today that Gaddafi's remains were buried "overnight in a religious ceremony", along with the corpses of his son Mutassim and ex-defence minister Abu Bakr Yunis Jaber.
The bodies had been put on display in a market freezer on the outskirts of Misrata, 215 kilometres (132 miles) east of Tripoli, with thousands of Libyans queuing up since Friday to view and photograph them.
According to guards at the entrance to the market, a convoy of four or five military vehicles took the bodies away to an unknown location late on Monday night.
Three religious leaders loyal to the ousted dictator prayed and performed a religious ceremony before the burial, the military council member told AFP.
The two sons of the former defence minister, brought straight from prison, and his father were present to witness the bodies being picked up from the market, the source said.
"I saw the burial permit. It stated that Gaddafi had two gunshot wounds, one in the head and one in the chest, and that he bore the scars of previous surgical operations," the source added.
The overnight burials come amid raging controversy over the circumstances of Gaddafi's death after he was taken alive during the fall of his hometown Sirte last Thursday.
Libya's interim leader Mustafa Abdel Jalil said a commission of inquiry is to probe the strongman's killing after concerns raised by foreign governments and rights group.
Abdel Jalil has said that in response to international calls, "we have started to put in place a commission tasked with investigating the circumstances of Muammar Gaddafi's death in the clash with his circle as he was being captured".
The UN human rights office welcomed the announcement.
Disquiet has grown internationally over how Gaddafi met his end after NTC fighters hauled him out of a culvert where he was hiding following NATO air strikes on the convoy in which he had been trying to flee his falling hometown.
Mobile phone videos show him still alive at that point.
Libya's interim prime minister Mahmud Jibril said in Jordan on Sunday that an autopsy report showed Gaddafi was killed in "crossfire from both sides."
Although NTC officials earlier said they planned to hand Gaddafi's body to his relatives, but the military council in Misrata was determined to bury it in a secret, amid concerns the grave might become a rallying point for residual loyalists.
Born in 1942, Gaddafi was a young colonel when he came to power in a military coup, on September 1, 1969, that overthrew the Western-backed elderly King Idriss. He quickly established himself as a belligerent, unpredictable and in later years, eccentric, leader.
For decades linked to a spate of international terror attacks, Gaddafi's Libya was accused of using its oil wealth to fund and arm rebel groups across Africa and beyond.
He is believed to have fled to Sirte after NTC forces overran his fortified Tripoli headquarters in August, six months after pro-democracy demonstrations first erupted in Benghazi.
But Gaddafi evaded capture and vowed to fight on against the NATO-backed rebels in defiant audio messages broadcast until just weeks before his death.
Meanwhile, a fuel tank exploded in Sirte late on Monday killing more than 100 people, NTC military commander Leith Mohammed said.
"There was an enormous explosion and a huge fire. More than 100 people were killed and 50 others wounded" Mohammed told AFP in Tripoli.
He said the scene was "a heart wrenching spectacle with dozens of charred bodies."
The accidental explosion happened as a crowd of people waited near the fuel tank to fill up their cars.
"We are still unable to put out the fire," said Mohammed, adding that it had been caused by a spark from a nearby electricity generator.
Some of the victims had returned to the town, the last bastion of resistance by Gaddafi loyalists, which fell on Thursday, to inspect the damage to their properties, the NTC commander added.