Academics who wrote about Gadhafi's "Green Book", containing his musings on politics, economics and everyday life, will also be barred from running under the draft law, published online by the National Transitional Council (NTC) on Sunday night.
"This is a very important law because people are complaining that some of Gadhafi's figures still occupy high positions," said Abeir Imnena, a university professor among a number of legal experts, judges and lawyers involved in drafting the bill.
"This is to tell people that there's no room for them (Gadhafi supporters)."
Hundreds of people have taken to the streets of the capital Tripoli in the past few weeks to urge the new rulers to fire senior government officials they say have close links to Gadhafi.
The NTC, Libya's self-appointed but internationally-recognized interim leadership, said it would only sack those proved to have been involved in committing human rights abuses or stealing public funds.
The legislation would regulate the election of a national assembly charged with writing a new constitution and form a second caretaker government. It is expected to be finalised within a month, Imnena said.
Meanwhile, Libyans can leave their comments and proposals, the NTC has said, in a bid to involve civil society and move Libya away from militancy.
The NTC is grappling to disband dozens of rival militias with regional allegiances, more than two months after rebels captured and killed Gadhafi.
Interim Prime Minister Abdurrahim al-Keib confirmed on Monday that the election of the assembly would take place in June.
Constituencies
The bill also bans former officials accused of torturing Libyans or embezzling public funds, active members of the Revolutionary Guard, and opposition members who made peace with Gadhafi.
It gives women 20 seats in the 200-member national assembly.
Imnena, who teaches political science at the University of Benghazi, said finalising the election law would be followed by the appointment of an election commission to oversee the poll.
The draft law, however, did not include details about dividing the country into constituencies. Instead it left the task to the election commission, stipulating that the size and population of each of the country's districts should be taken into consideration.
Experts said the new constituencies should also take into account the needs of minorities such as the Amazigh, or Berber, whose language and culture were suppressed under Gadhafi.
Libyan experts say the candidates will run as independents because the country does not have a law regulating political parties, which were banned under Gadhafi.
