The UN Security Council on Wednesday urged Libya's parties to sign an agreement to form a national unity government and threatened sanctions against those who stand in the way of a deal.

UN envoy Bernardino Leon has submitted a draft proposal that he said could be ready for endorsement when peace talks resume in Morocco on Thursday.

Security Council members said in a unanimous statement that "there can be no military solution to the crisis in Libya" and urged all sides to "sign the proposal presented by the UN support mission in Libya in the coming days."

They stressed that forming a national unity government "is in the interests of the Libyan people and their future, in order to end Libya's political, security and institutional crises and to confront the rising threat of terrorism."

The 15-member council said it was "prepared to sanction those who threaten Libya's peace, stability and security or that undermine the successful completion of its political transition."

A previous bid by Britain, France, Spain and the United States to step up pressure on the sides with sanctions was blocked by Russia and China.

The United Nations has been brokering talks between Libya's various groups with a view to establishing a government that could confront the threat from Islamic State extremists who have gained a foothold in several towns.

A surge of jihadist violence across the region, including the killing of 38 people, most of them British tourists, at a Tunisian beach resort on Friday, has prompted mounting international pressure for a deal.

The United Nations hopes a new government in Libya would also be able to combat migrant smugglers who pack desperate refugees on rickety boats across the Mediterranean to Europe.

Libyan factions agreed during Geneva talks in January to set up a national unity government to restore stability that has been shattered since the 2011 fall of Moamer Kadhafi.

Libya has two rival parliaments and governments, with Tripoli controlled by Libya Dawn forces who seized the capital last year, forcing the internationally recognized government to operate out of Tobruk, in the northeast of the country.