The prime minister said there would "undoubtedly be difficult days ahead", but the Libyan people were "closer to their dream of a better future".
He said the UK could be "proud" of the part it had played, but stressed the future of the country - and Col Gaddafi himself - was up to Libyans themselves.
Rebel forces have taken control of large parts of Libya's capital Tripoli.
However, the Ministry of Defence stressed that fighting was still going on in the Libyan capital and Nato operations - including those by UK forces on strategic targets controlled by the regime - were continuing.
Mr Cameron interrupted his holiday to return to London to chair an hour-long meeting of the National Security Council, attended by Defence Secretary Liam Fox and International Development Secretary Andrew Mitchell among other ministers.
It is the second time his holiday plans have been disrupted this summer, having abandoned a break in Tuscany earlier this month due to the riots across England.
'No complacency'The prime minister committed British forces to conduct aerial and naval missions in Libya in March, enforcing the terms of a UN mandate to protect Libyan civilians from attacks.
The decision was overwhelmingly endorsed by Parliament, and in a statement in Downing Street on Monday morning, Mr Cameron again said it was "necessary, legal and right".
Insisting that Nato's mission in Libya would continue as long as it was needed, the PM went on: "The situation in Tripoli is clearly very fluid and there is absolutely no room for complacency.
"Our task now is to do all we can to support the will of the Libyan people which is for an effective transition to a free, democratic and inclusive Libya.
Some civilians have cheered rebels as they advanced on Tripoli "This will be and must be and should be Libyan-led and a Libyan-owned process with broad international support co-ordinated by the United Nations."
Mr Cameron said Libyan assets in the UK would soon be unfrozen in order to help with post-conflict reconstruction, and the UK would be offering help with medical supplies, food provision and communications and utilities services.
He also said the UK would establish a diplomatic presence in Tripoli as soon as it was safe to do so.
The UK, France and the US have long called for Col Gaddafi to leave power and Mr Cameron again repeated that call, urging him to "stop fighting without conditions".
He said he wanted "to see Gaddafi face justice for his crimes" but said his whereabouts were unknown and insisted that his future would be up to the Libyan people, led by the interim political authority, the National Transitional Council.
Mr Cameron spoke by telephone to the council's leader Abdul Jalil later on Monday.
A No 10 spokeswoman said Mr Jalil had confirmed that rebel fighters were in control of most of Tripoli, but there were still pockets of resistance throughout the country.
"The prime minister welcomed the leadership that Jalil had shown and encouraged him to build on this in the coming days as the NTC implement their constitutional declaration. They agreed the need to continue to respect human rights through the transition process," she said.
Post-conflict planningRebel forces met little resistance during a rapid advance on Sunday, when two of Col Gaddafi's sons were among those captured, but fierce fighting is taking place in parts of the capital.
Continue reading the main storyThe best way for Libya to move forward is through a transition led and enforced by the Libyan people”End Quote Ed Miliband Labour leader The BBC's political correspondent Ben Wright said there would be some satisfaction in Downing Street since Mr Cameron had taken a risk in being among the earliest and most vocal supporters of foreign intervention in Libya.
However, he said No 10 would be mindful of uncertainty over how events could develop and be aware that a lot of work would be needed to stabilise the country.
Labour leader Ed Miliband welcomed developments in Libya, but also stressed the need to ensure a orderly transition "from popular revolt against Colonel Gaddafi to stable government without him".
"The best way for Libya to move forward is through a transition led and enforced by the Libyan people that learns the lessons of the past, including Iraq," he said in a statement.
"The priorities are public order, improved lives for the people of Libya and an inclusive, peaceful settlement led by the Libyan people. "
'Degree of humility'Meanwhile, Deputy Prime Minister Nick Clegg has given a speech in London about the wider Arab Spring, which has seen uprisings across the Middle East and North Africa.
He said such countries were "on the right side of history" and the UK would do all it could to help them - for example, offering practical support to create new political parties, prevent corruption, promote a plural press and register voters.
Ed Miliband: "Transition must be lead by the Libyan people"He also said countries would be given help to access to global financial markets, but only if they could prove their commitment to domestic reform.
The deputy PM said the UK should show "a degree of humility" about its failure in the past to speak out against repressive regimes like that of Col Gaddafi or President Bashar al-Assad in Syria.
"We attended to these autocrats in the name of stability, accepting their corruption and economic mismanagement as its necessary price and satisfying ourselves with false promises and cosmetic reform," he said.
"We have learned from those mistakes."
Human rights groups believe about 2,000 people have been killed by Syrian security forces in recent months, and Mr Clegg again urged President Assad to step down, calling him "as irrelevant to Syria's future as Gaddafi is to Libya's".
The Lib Dem leader added that the decision to support military intervention in Libya "was not one the UK took lightly", particularly his party and others who opposed the Iraq invasion, but the country was now "on the cusp of freedom".
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