The arrest of the other survivor of the old regime who is wanted at The Hague for crimes against humanity would crown a momentous couple of days for a new government that is still in the process of formation, and also pose immediate tests of its authority - both over the militias and with the world powers.

A commander of former rebel forces nominally loyal to the National Transitional Council (NTC), General Ahmed al-Hamdouni, told Reuters that his men, acting on a tip, had found and surrounded Senussi at a house belonging to his sister near the town of Birak, about 500 km (300 miles) south of Tripoli and in the same general area as Saif al-Islam was seized on Saturday.

An NTC spokesman, Abdul Hafez Ghoga, and Free Libya television said Senussi, who is Saif al-Islam's uncle by marriage, had been captured, although information was sketchy.

But Hamdouni, commander of forces for the vast Fezzan province that comprises Libya's Saharan south, said negotiations were continuing near Birak.

Like Muammar Gaddafi, who was captured and killed on the coast a month ago on Sunday, Saif al-Islam and Senussi were indicted this year by the International Criminal Court for alleged plans to kill protesters following the Arab Spring revolt that broke out in February. But NTC officials have said they can convince the ICC to let them try both men in Libya.

Ghoga said NTC members meeting on Sunday had confirmed that preference, as did the current justice minister - although legal experts point out that international law demands Tripoli make a strong case for the right to try anyone who has already been indicted by the ICC. Given the state of Libya's legal system after 42 years of dictatorship, as well as the depth of feelings after this year's civil war, the ICC may not agree.

Its chief prosecutor is expected in Libya this week.

Saif al-Islam Gaddafi spent Sunday secreted in the militia stronghold of Zintan while in Tripoli the Libyan rebel leaders who overthrew his father tried to resolve their differences and form a government that can try the new captive.

With rival local militia commanders from across the country trying to parlay their guns into cabinet seats, officials in the capital gave mixed signals on how long the prime minister-designate, Abdurrahim El-Keib, may need to form his full team.

Ghoga said the NTC had given Keib another two days, right up to a deadline of Tuesday, to agree his cabinet - a delay that indicated the extent of horse-trading going on.

And though the Zintan mountain fighters who intercepted the 39-year-old heir to the four-decade Gaddafi dynasty deep in the Sahara said they would hand him over once some central authority was clear, few expect Saif al-Islam in Tripoli soon.

Members of the NTC, the self-appointed legislative panel of notables formed after February's uprising, expect to vote on Keib's nominees, with keenest attention among the men who control the militias focussed on the Defence Ministry.

One official working for the NTC said that the group from Zintan, a town of just 50,000 in the Western Mountains outside Tripoli that was a stronghold of resistance to Gaddafi, might even secure that ministry thanks to holding Saif al-Islam.

Other groups include rival Islamist and secularist militias in the capital, those from Benghazi, Libya's second city and the original seat of revolt, and the fighters from the third city of Misrata, who took credit for capturing and killing the elder Gaddafi and haggled with the NTC over the fate of his rotting corpse for several days in October.