* Gaddafi may be in his hometown of Sirte
* Last big town on the coast outside rebel control
* Rebels say seeking to avoid bloodbath
By Robert Birsel
BENGHAZI, Libya, Aug 24 (Reuters) - Libyan rebels closed in on Muammar Gaddafi's home town of Sirte on Wednesday, the last remaining bastion of government loyalists and where Gaddafi himself could be hiding, rebels said.
Gaddafi supporters in the town, about 450 km east of Tripoli, have been instructed to fight to the death and may not be aware the leader's 42-year rule is crumbling, the rebels said.
"Gaddafi sent a message telling them to fight to the death," Hassan Droy, a representative of the rebel National Transitional Council, told Reuters. "A problem is the people there are totally disconnected - they've had no electricity or telephones for three days -- and they don't know what's happening."
He said rebels would seek to negotiate once they arrive near the town, but would fight if necessary.
"He (Muammar Gaddafi) could be there," Droy said.
Rebel fighters stormed into Tripoli earlier this week and rampaged through Gaddafi's compound in the capital on Tuesday in what is widely seen as a final blow to his rule following a six-month war. But Gaddafi's whereabouts remain a mystery.
Rebel fighters were approaching Sirte from both Misrata to the east and Ras Lanuf to the west, having secured most of the rest of the coast, rebels sources said. The majority of Libya's 6 million people live in coastal cities.
"Sirte is now our main challenge," rebel spokesman Mohammad Zawawi said. "If we can (take Sirte), it'll mean the whole coast, the north side of Libya, will be clear and then we can look to the south," he said.
Some 100,000 people live in Sirte.
The NTC's Droy said Gaddafi had significant support from members of his own tribe in Sirte, but only about 10 percent of members of other tribes in Sirte supported him.
"The tribe of Gaddafi is the main problem right now," he said. He said the rebels had cut off the town and supplies would soon run out, which might mean the defenders have no choice but to negotiate.
(Editing by Richard Valdmanis in Tunis)