The UN Security Council unanimously ordered a travel and assets ban on Moamer Kadhafi's regime and a crimes against humanity investigation into the bloodshed blamed on the strongman.
A unanimous vote by the 15-nation body at a rare Saturday night meeting also called for an immediate arms embargo against Libya, where the UN says more than 1,000 people have been killed in attacks blamed on Kadhafi loyalists.
The council made a new demand for an immediate end to the attacks on civilians which it said had been incited "from the highest level" of Libyan leaders.
The travel ban and assets freeze in Resolution 1970 will target the 68-year-old Libyan leader, seven of his sons and daughter Aisha, other family members and top defense and intelligence officials accused of playing a role in the bloodshed.
There are 16 names on the sanctions list in all. The figure was cut from 22 during negotiations on Saturday.
The bloodshed was referred to the International Criminal Court because the council said "the widespread and systematic attacks currently taking place (in Libya) against the civilian population may amount to crimes against humanity."
Under the resolution all arms sales to Libya must stop immediately. The resolution also called on Libya to let in humanitarian supplies and human rights monitors and to protect foreigners.
The measures were "a powerful signal of the determination of the international community to stand with the people of Libya and determine their own future," said Britain's UN ambassador Mark Lyall Grant.
South Africa's envoy Baso Sangqu said the whole world had been shocked by "the untold atrocities" in Libya.
US ambassador to the United Nations, Susan Rice, said the council wanted "biting sanctions targeting Libya's unrepentant leadership. This is a clear warning to the Libyan government that it must stop the killing."
The landmark vote saw the United States support referring a crisis case to the International Criminal Court for the first time.
The United States is not a member of the ICC and abstained when the Darfur conflict in Sudan was sent to the international court 2005 for a crimes against humanity investigation. China and Russia also backed the resolution even though they also traditionally oppose sanctions action against individual countries.
Libya is the first of the Arab nations hit by political and social turmoil in recent weeks to be discussed at the Security Council.
Pressure on the council to act had increased by a warning from UN Secretary General Ban Ki-moon on Friday that a delay in taking "concrete action" would cost lives.
Libya's UN ambassador, Abdurrahman Shalgam, the country's former foreign minister, also made an impassioned plea for the council to take action against the "atrocities" committed by his childhood friend Kadhafi.
In negotiations, several countries raised reservations about referring Libya to the International Criminal Court.
But Shalgham wrote a letter to the council on Saturday expressing strong backing for the resolution including involving the ICC.
"Faced with the atrocities we are seeing, impunity is no longer an option," French UN envoy Gerard Araud told the council after the vote.
Richard Dicker, Human Rights Watch's international justice specialist, commented: "The Security Council tonight rose to the occasion and showed leaders worldwide that it will not tolerate the vicious repression of peaceful protesters.
"Kadhafi's henchmen are now on notice that if they give, tolerate or obey orders to fire on peaceful protesters they may find themselves in The Hague," he added.