Nato has admitted "a weapons systems failure" may have led to civilian casualties in Sunday morning's air strike in the Libyan capital, Tripoli.
Trying to explain the faux pas, the alliance said the intended target was a missile site, but "it appears that one weapon" did not hit it.
Nato's announcement came after the Libyan government had revealed the Alliance had bombed a residential area, and insisted the strike had killed nine civilians, including two babies.
According to Libyan authorities, the attack targeted one of Tripoli's poorer neighbourhoods and happened shortly after midnight.
Libyan Deputy Foreign Minister Khaled Kaim said the incident represented a "deliberate targeting of civilian houses".
On Sunday evening, the commander of operation Unified Protector, Lt Gen Charles Bouchard, said: "Nato regrets the loss of innocent civilian lives and takes great care in conducting strikes against a regime determined to use violence against its own citizens.
One shell whistled above us and smashed into an orchard perhaps 100m away"
"Although we are still determining the specifics of this event, indications are that a weapons system failure may have caused this incident."
The statement, defending the organisation's operational skills, added that more than 11,500 sorties had already been conducted and "every mission is planned and executed with tremendous care to avoid civilian casualties".
The deaths of civilians in Tripoli, reported yesterday, are a deeply regrettable development. It seems ironic that while the organisation is there to protect civilians, they, as always, end up paying the price. While many will say that what happened on Sunday is just an "accident", and that the operation has saved thousands of life, by choosing to use aerial bombardments, Nato has given the Libyan conflict the aspect of a full fledge war.
It is unsure whether that the civilians, who repeatedly hear bombs while wondering if they are safe, feel protected by the Alliance. Four months into the conflict and Gaddafi is still standing while the rebels are now voicing their disappointment with Nato.
While the rebels control a third of Libya in the east and pockets in the west, including Misrata, Tripoli and the rest of the country remains under government control. Recently the Libyan opposition has been cash trapped and maintain they need more money and material to fight the Gaddafi regime.
On Sunday, senior officials from the rebel Transitional National Council (TNC) issued an urgent plea for foreign financial aid. They insisted that despite having won promises of assistance from their Western and Arab supporters, they have yet to receive any money.
The officials insisted they need more than $3bn (£1.9bn) to cover salaries and other needs in the next six months.
It seems that so far, the TNC has paid salaries and met other costs by drawing on whatever money was left in the Benghazi branch of Libya's central bank, which in itself is a questionable strategy, as the money that has been used was not really theirs.
However, rebel strategic adviser Shamsuddin Abdul Mullah has claimed that while the movement is now running out of cash, they still hope the delay was temporary.
TNC officials explained they need the money urgently to buy medical supplies for the frontline, as well as to "avoid popular frustration with a situation that was becoming increasingly dire", pointing out to the population's struggle.
The situation in Libya is indeed getting worse by the day, as the longer the conflict lasts, the more the population will become affected by fuel, food and medicine shortages.
As the public grow impatient the Alliance will need to find a rapid way out if it does not want its reputation to suffer even more. US Defence Secretary Robert Gates has casted doubts on the organisation's future, and UK Sea Lord Admiral Mark Stanhope has complained about the mounting cost of the operation.
Back in March, when military action began, George Osborne said that the cost to the United Kingdom would be "in the order of tens of millions of pounds, not hundreds of millions". Yesterday, however, Danny Alexander, Chief Secretary to the Treasury, contradicted the Chancellor. "The campaign is costing tens of millions, potentially into the hundreds of millions," he said. He was quick to add that the money was coming from a reserve "set aside for these contingencies" and would not have an effect on any other spending.
According to Mr Alexander, Britain is "leading Libya towards a better future". However with civilians being targeted, and the uncertainty regarding the rebel fighters, and what will really happen if Gaddafi leaves, the idea that Nato is really leading Libya towards a better future sounds more and more like an utopia.