The Prime Minister insisted the time was right to "ratchet up" the pressure on the Libyan leader.
The decision follows claims the embattled dictator was becoming increasingly paranoid and "on the run".
MI6 told the PM it had discovered the ruler's behaviour was becoming more erratic as Nato airstrikes take their toll.
Mr Cameron, speaking in France as the G8 summit ended, said Col Gaddafi was "feeling the pressure".
"There are signs that the momentum against Gaddafi is really building," he said.
"We know that we're on the right side, we're doing the right thing, the pressure is telling."
MORE NATO STRIKES ON TRIPOLI OVERNIGHT
Mr Cameron also confirmed that four UK and 12 French attack helicopters would be used in Libya - but he did not say when they would begin operations.
Sky sources said the aircraft would be sent in to the North African country by the weekend.
The decision comes as Russia announced it was ready to mediate on the mission to end Col Gaddafi's four-decade rule.
It was a change in tone from the Kremlin's previous criticism of Western intervention in the Libyan crisis.
The Russian deputy foreign minister, Sergei Ryabkov, said: "Colonel Gaddafi has deprived himself of legitimacy with his actions, we should help him leave."
Now there are signs that the momentum against Gaddafi is really building. We know that we're on the right side, we're doing the right thing, the pressure is telling."
British Prime Minister David Cameron
But Mr Cameron played down the country's offer, stressing the only resolution involved Col Gaddafi leaving power.
As Nato plans to step up attacks on Col Gaddafi's forces, more explosions have been heard near the his compound in Tripoli for the fourth night this week.
Sky's foreign affairs correspondent Lisa Holland, who is in Tripoli, said she heard five loud explosions coming from that area on Thursday night.
It is believed Col Gaddafi is moving between hospitals in the capital nightly in a bid to evade the missiles.
Gaddafi has not been seen publicly for over two weeks
His youngest son, Saif al Arab, and three of his grandchildren were killed in an airstrike a few weeks ago.
The new information is understood to have convinced Mr Cameron that the time was right to "turn the screw".
Mr Cameron, Defence Secretary Liam Fox and military chiefs have agreed to put four Apache attack helicopters at the disposal of the Nato operation, alongside existing warplane deployments.
The advantage of the aircraft is they can carry out strikes at much closer quarters, reducing the potential for collateral damage and allowing a wider range of targets to be taken on.
They are expected to be used against Col Gaddafi's troops in built-up areas of the city of Misratah.
The Apaches could begin operating from HMS Ocean, which is in the Mediterranean, almost immediately.
The situation in Libya was one of the main topics at a meeting of G8 leaders in France on Thursday.
Mr Cameron and French president Nicolas Sarkozy agreed that the pressure on Gaddafi must be increased.
Mr Sarkozy has already authorised the use of 12 French attack helicopters, flying from the amphibious assault ship Le Tonnerre.
In a joint interview with the French president at the summit, US President Barack Obama vowed to "finish the job" in Libya, saying Col Gaddafi had to be removed.
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