One person was killed and five wounded in Libya's eastern city Benghazi today when a car bomb exploded at a funeral for an assassinated army officer, security and medical sources said.

The army colonel had been killed by a device planted under his car which exploded while he was driving through the city centre yesterday, a security source said. He died in hospital this morning.

When relatives and friends gathered for his funeral at noon today, a car bomb exploded in the crowd.

The security situation has sharply deteriorated in Libya's second-largest city in the past few months. The capital Tripoli last month saw the worst fighting in months between militias.

Most countries closed their consulates in Benghazi after a series of attacks and some foreign airlines have stopped flying there.

The US ambassador and three other Americans were killed in September 2012 during an Islamist assault on the consulate.

Stability in eastern Libya is crucial for the country's oil output, 60 per cent of which comes from its eastern half.