The flag has been spotted on the courthouse several times, prompting denials from the National Transitional Council that it was responsible.
Complete with Arabic script declaring ‘there is no God but Allah’ and a full moon underneath, it was hoisted alongside the Libyan national flag.
There are reports that extremists have been seen on Benghazi’s streets at night, waving the Al Qaeda flag and shouting ‘Islamiya, Islamiya! No East, nor West
Mar 17: U.N Security Council passes a resolution to impose a no-fly zone in Libyan airspace.
Mar 19: French and Italian aircraft enter Libyan airspace to begin reconnaissance and surveillance. British and U.S. ships and submarines fire Tomahawk cruise missiles at Libyan air and ground defences.
Naval blockade also enforced.
May 11: Nato aircraft fires four rockets at Gaddafi's compound in Tripoli, killing two people.
May 12: 52 NATO strikes are carried out against loyalist targets across the country.
May 26: In the strongest attack of the operation so far, Nato planes bomb 20 targets in Tripoli under 30 minutes.
June 13: Nato carries out 62 airstrikes against targets in Tripoli and four other cities.
June 20: Nato is accused of killing 19 civilians in Sorman, west Tripoli, following another attack
July 16: Another Nato strike kills 10 rebels and wounds 172 during an advance on Brega.
Aug 9: Nato bombs a warship in Tripoli harbour.
Aug 20: Nato-supported rebels in Tripoli launch an uprising in the city, as Nato launch bombing raids over government targets.
Oct 20: Rebel forces take Sirte, with Gaddafi captured and eventually killed as Nato planes attack his convoy.
Oct 23: Gaddafi's family are forced to flee as rebels claim his compound in Bab al-Azizia.
Oct 31: Nato ends operations in Libya
A sudden lurch toward extremism will alarm many in the West who supported the ousting of Colonel Gaddafi.
It also threatens to embarrass David Cameron who staked his personal reputation on the campaign to free Libya from the tyrant. Nato stuck to its decision to end its seven-month operation despite calls from the National Transitional Council for it to stay longer.
Allies of Nato have been keen to see a quick conclusion to a costly effort that has involved 26,000 air sorties and round-the-clock naval patrols.