The United Nations and European states on Sunday welcomed a UN peace deal initialed by some Libyan factions but not by the opposition as a step towards restoring stability in the country.

The United Nations and European states on Sunday welcomed a UN peace deal initialed by some Libyan factions but not by the opposition as a step towards restoring stability in the country.

Plunged into chaos since the 2011 overthrow of dictator Moammar Gaddafi, Libya has two parliaments and governments vying for power, as a slew of armed groups battle for control of its oil wealth.

UN Secretary General Ban Ki-moon was "encouraged" by the initialing of the accord, a UN statement said.

"He looks forward to the speedy conclusion of the full agreement and its implementation," a spokesman for the UN chief said.

"This act is a clear demonstration of political will and courage and brings the country one step closer to resolving the current institutional and security crisis."

Ban urged "all Libyans" to move the transition process forward by forming a national unity government.

The UN Security Council has urged Libyan factions to sign on to Leon's proposals in a bid to stem rising violence and the spread of radical organizations such as the so-called 'Islamic State of Iraq and the Levant' (ISIL) takfiri group.

EU foreign policy chief Federica Mogherini said the deal was "an important step towards restoring peace and stability in Libya" and urged the General National Congress to initial it as well.

The deal initialled on Saturday was the fourth draft UN envoy Bernardino Leon had proposed.

It consists of six points aimed at "laying the foundation for a modern, democratic state based on the principle of inclusion, the rule of law, separation of powers and respect for human rights", Leon said.

Among the sticking points is a call for "respecting the judiciary", a possible reference to a Supreme Court decision invalidating the Tobruk parliament which was elected in June 2014.