Isis militants have seized control of a Libyan City on the Mediterranean coast only 200 miles from the shores of Europe, said Libyan sources.

Fighters loyal to the jihadist group are now in control of the city of Derna, which has a population of about 100,000, is close to the Egyptian border, and about 200 miles from the shores of the European Union.

About 800 fighters are living in camps on the outskirts of the city, with more based in the nearby Green Mountains, where militant training camps have been established, Libyan sources told CNN.

The city is only hours from Tobruk, where Libya's government fled after being driven out of the capital, Tripoli, which collapsed into chaos in summer as rival rebel groups fought for control.

"Derna today looks identical to Raqqa, the Isis headquarters town in Syria," Noman Benotman, a former Libyan jihadist who now works with the Quilliam Foundation told CNN.

"Isis pose a serious threat in Libya. They are well on the way to creating an Islamic emirate in eastern Libya," Benotman said.

Last week, the bodies of three anti-Isis activists were found decapitated in the town, said the sources, and judges, campaigners and military officials were targeted for assassination.

In October, Derna's Islamic Youth Council, made up of former militants from the city, pledged their allegiance to Isis.

They have been backed up by hardened veterans from the group's insurgency campaigns in Syria and Iraq, such as the 300-strong al-Battar Brigade, who fought at Deir Ezzor, Syria, and Mosul. They have been sent to Libya to spearhead the group's drive into the country.

In a rare audio address last week, Isis' leader Abu Bakr al-Baghdadi formally welcomed several new groups which had pledged loyalty to his "caliphate", into the Isis fold, including Libyan militants.

Since the fall of dictator Muammar Gaddafi in 2011, rival militias have been battling for control of the country, and the authority of the central government has collapsed.