"The blood of martyrs will not be spilled for nothing," the crowd, which attended the weekly Muslim prayers, chanted as Younes' coffin was carried away under the nervous gaze of security forces.
Younes was shot dead by a gang after he was summoned from the front by the National Transitional Council "for questioning over military issues," NTC chairman Mustafa Abdel Jalil said late on Thursday.
"With all sadness, I inform you of the passing of Abdel Fatah Younes, the commander-in-chief of our rebel forces," Abdel Jalil said in a statement at a news conference in Benghazi, the rebels' eastern stronghold.
"The person who carried out the assassination was captured," a sombre looking Abdel Jalil said without elaborating, moments before armed men stormed the hotel where he was speaking and accused the NTC of the assassination.
Younes' death, and that of two officers with him, left rebels with a leadership crisis on the same that they made fresh advances in the western Nafusa mountain range as part of a pre-Ramadan push to oust Gaddafi.
The United States urged the rebels to stand united and stay focused on ousting Gaddafi and blamed him for creating the conditions that led to the murder.
State Department spokesman Mark Toner said: "I think what's important is that they work both diligently and transparently to ensure the unity of the Libyan opposition.
"In this kind of fluid situation, it's important to keep, if you will, eyes on the prize, which is the democratic transition for the Libyan people," Toner said.
"Such tragedies speak to the situation that's been created by Gaddafi and his regime. It underscores why he needs to leave power and do so immediately."
In London, Britain's minister for the Middle East and North Africa, Alistair Burt, said he condemned the assassination and had delivered his condolences to Abdel Jalil.
"Exactly what happened remains unclear. I welcome chairman Abdel Jalil's statement yesterday that the killing will be thoroughly investigated, and he reiterated this to me during our conversation.
"We agreed that it is important that those responsible are held to account through proper judicial processes."
The assassination of Younes, Libya's interior minister and Gaddafi number two before defecting in February, has fuelled a broad range of rumours, including that rebels killed him for treason.
Meanwhile, a senior opposition figure in Benghazi accused Gaddafi on Friday of playing a role in the killing.
Early reports from Tripoli that Yunis had been killed suggested Gaddafi wanted it in a bid to get rebels to withdraw from the strategic eastern oil town of Brega.
"All these are signs Gaddafi was behind it," the official told AFP, asking not to be named.
Younes was killed as he returned from the front line, which lies near Brega.
The scenario that the rebels may be fighting among themselves could pose awkward problems for the many Western powers who have recognised the NTC as the sole legitimate authority in Libya.
"The NTC hasn't been able to make any clear, credible statements about Younes because they don't really know what's going on," Lynette Nusbacher, senior lecturer in war studies at Britain's Royal Military Academy Sandhurst, told AFP.
"Nobody wanted him alive except maybe his mother," she said, adding that the leadership crisis opened an opportunity for rebels to promote a better field commander to his position.
At least three loud explosions shook the centre of Tripoli late Thursday, as Libyan television reported planes were flying over the capital, which has been the target of NATO air raids.
Al-Jamahiriya television said several "civilian sites" had been bombed by NATO on Thursday.
Rebels seized two localities near the Tunisian border earlier in the day as part of their offensive ahead of the start early next week of the Muslim fasting month of Ramadan, an AFP correspondent said.
The first was the town of Al-Ghazaya, some 12 kilometres from the frontier, and the second was Umm Al-Far, a hamlet of a few hundred inhabitants 10 kilometres northeast of there.
The Nafusa mountains have seen some of the fiercest fighting between loyalist troops and rebel forces.
The two sides had fought their way into a stalemate five months after the start of a popular uprising that quickly turned into a civil war.
The Libyan leader controls much of the west and his Tripoli stronghold, while the opposition holds the east from its bastion in Benghazi.
In Brussels, a NATO official told AFP Norway will fly its last combat mission in Libya on Saturday, two days before the official end of its role in the air war.
But a Norwegian military spokesman, Colonel Petter Lindqvist, refused to confirm that.
And Portugal became the latest country to recognise the NTC, the foreign ministry said.
Libya's rebel capital mourns slain army chief
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