Power went off in the port city after rockets hit the Benina electricity plant which supplies Benghazi and neighboring towns, residents and state news agency LANA said.
Residents said they could hear war planes circling Libya's second-largest city.
Libyan authorities are struggling to restore order across the vast desert nation ahead of a June 25 parliamentary election. The situation remains especially chaotic in Benghazi, Libya's second largest city and cradle of the NATO-backed uprising that toppled Muammar Gaddafi three years ago.
Retired general Khalifa Haftar has declared war against militants in Benghazi and several army units have joined him, though the Tripoli government says he has no authority to act.
"There are now heavy clashes in Sidi Faraj and al-Hawari (in western Benghazi). Our forces are attacking with tanks and rocket launchers," Haftar's spokesman Mohamed El Hejazi said.
Residents were seen packing belongings into cars and heading out of the area to escape the fighting.
Hejazi said Haftar had warned the Islamists against shipping in arms via the commercial port of Derna, east of Benghazi.
Derna is a hotspot for Ansar al-Sharia and other militant groups amid Libya's persistent power vacuum. The United States designates Ansar al-Sharia a terrorist organisation.
Haftar was once close to Gaddafi but fell out with him and then played a role in the 2011 uprising. In February, he stirred rumors of a coup by appearing in military uniform to call for a presidential committee to be formed to govern till an election.
Libya's government and parliament are paralyzed by divisions between Islamists and more moderate forces as well as competing tribes and regions.
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