"Hundreds of Libyans will martyr in Europe," Gaddafi Friday told a multi-thousand-strong crowd in Sabha, some 500 miles south of capital Tripoli in a speech shown on national television, adding NATO will regret "when the war moves to Europe".
The threat came as insurgents suffered casualties Friday after a massive attack by NATO aircraft.
Gaddafi pledged to use the "eye for an eye and tooth for a tooth" principle, adding that he and his supporters were ready to "become martyrs and fight until the end."
Libya has been rocked by fighting between pro- and anti-Gaddafi forces since mid-February.
An international military operation in Libya began March 19, following a UN resolution authorising countries "to take all necessary measures" to help protect Libyan civilians from attacks by Gaddafi forces, and was extended until late September.
On July 2, Gaddafi had warned of attacks in Europe unless NATO stops its air strikes against key facilities in the North African country.