"Today, the eyes of the people of Libya all on you," UN special envoy Bernardino Leon told the parties at the outset of talks on Monday in the Moroccan seaside resort town of Skhirat, saying they had the power to "bring an end to the suffering of the Libyan people".
"Recent terrorist and other attacks from groups in the country should serve as a wake up call... The fighting must end," the Spanish diplomat urged.
Since the beginning of the year, the UN has facilitated a series of different negotiating tracks seeking to bring together Libya's rival governments and militias, Al Jazeera reported.
Western officials say the talks are the only hope of halting fighting that has battered the country since the 2011 uprising that ended Muammar Gaddafi's one-man rule.
An internationally recognised government has been operating out of eastern Libya since an armed alliance known as Libya Dawn took over the capital Tripoli and set up a government last summer.
Libya's turmoil is an increasing concern for European leaders as groups claiming allegiance to the Islamic State in Iraq and the Levant (ISIL) group gain ground there and smugglers take advantage of the chaos to ship thousands of migrants across the Mediterranean Sea to Europe.
Delegates from both factions were expected to head to Germany for a meeting of European and North African leaders before returning to consult with their political bases and travelling back to Morocco for more talks.