Foreign ministers from the 22-member Arab bloc, meeting in Cairo, also left the Libyan leader of more than 40 years increasingly isolated, declaring his government had "lost its sovereignty."
They also appeared to confer legitimacy on the rebel's interim government, the National Libyan Council, saying they would establish contacts with it and calling on nations to provide it with "urgent help."
"The Arab League asks the United Nations to shoulder its responsibility ... to impose a no-fly zone over the movement of Libyan military planes and to create safe zones in the places vulnerable to airstrikes," said a League statement released after the emergency session.
The unusually rapid and bold action for a bloc of nations known for lengthy and acrimonious deliberations appeared to reflect the shifting currents of a Middle East in tumult. Many other Arab governments are facing street protests and rumblings of dissent stirred by the uprisings in Tunisia and Egypt, and their leaders may have felt compelled to act in favor of Libya's rebellion.
League Secretary-General Amr Moussa stressed in remarks afterward that a no-fly zone was intended as a humanitarian measure to protect Libyan civilians and foreigners in the country and not as a military intervention.
That stance appeared meant to win over the deeply Arab nationalist government of Syria, which has smarted against foreign intervention into Arab affairs.
The statement said the Arab League rejected "all kinds of foreign intervention" in Libya but warned that "not taking the necessary action to end the crisis will lead to intervention in Libya's foreign affairs."
The Arab League cannot impose a no-fly zone itself. But the approval of the key regional Arab body gives the U.S. and other Western powers crucial regional backing they say they need before doing so. Many were weary that Western powers would be seen as intervening in the affairs of an Arab country if they began a no-fly zone without Arab approval.
Still, the Obama administration has said a no-fly zone may have limited impact, and the international community is divided over the issue.
Moussa said the League would immediately inform the U.N. of its call.
Backing the rebel's political leadership, the League statement said it had faced "grievous violations and serious crimes by the Libyan authorities, which have lost their sovereignty."
It remained to be seen if any Arab forces would participate in air patrols in support of a no-fly zone.
The League's decision comes hours before the European Union's policy chief is set to arrive in Cairo to meet with the Arab bloc's leaders to discuss the situation in Libya.
Catherine Ashton said she hoped to discuss a "collaborative approach" with Arab League chief Moussa on Libya and the rest of the region.
Ashton said it was necessary to evaluate how effective economic sanctions imposed on Gadhafi's regime had been so far and that she was "keeping all options moving forward" regarding any additional measures.
German Foreign Minister Guido Westerwelle welcomed the EU's "very cautious" stance on possible military intervention.
"We do not want to be drawn into a war in north Africa -- we should have learned from the events in and surrounding Iraq," Westerwelle said.
"It is very important that the impression doesn't arise that this is a conflict of the West against the Arab world or a Christian crusade against people of Muslim faith."