Police confronted protesters who had set fire to the building in the port city of Benghazi, in the latest protests over the Muhammad cartoons.
They were said to be angry at Italian minister Roberto Calderoli, who had worn a T-shirt displaying the drawings.
Prime Minister Silvio Berlusconi has called for his resignation.
Mr Berlusconi was on the campaign trail in central Italy when he was forced to return to Rome to coordinate a response to the protests.
Speaking to Italian radio, Mr Berlusconi said the policy of the Italian government was one of respect for the Islamic religion.
The unrest began on Friday evening, when a crowd of about 1,000 protesters surrounded the consulate, Italian officials said.
Libyan police tried to hold them back by firing bullets and using teargas, he said.
"At least 10 demonstrators have been killed according to the police who sent me that toll," said the first secretary of Italy's embassy Dominico Bellatoni.
According to police, the crowd splintered off from a larger, peaceful demonstration in downtown Benghazi and headed towards the consulate.
The Italian foreign ministry said protesters broke into the grounds and set the first floor of the building on fire.
Libyan state television showed pictures of cars set alight and firefighters trying to extinguish the flames.
Stones were thrown at the building. Television footage showed ambulances taking casualties away from the scene.
The Libyan government has said it regrets the violence, which went on for a few hours.
It blamed the violence on what it called a small irresponsible group that it said did not reflect the Libyan spirit.
There have been worldwide protests since the publication of the cartoons satirising the Prophet Muhammad in Denmark's Jyllands-Posten newspaper last September.
Islam bans any depiction of Muhammad or Allah.
Reprints in other European countries have inflamed tensions even further.
Most of the protests have been targeted at Danish interests.
On Friday, Denmark temporarily shut its embassy in Islamabad after days of violent protests in Pakistan.
This is the fifth embassy that Denmark has closed since the cartoon row sparked off.
Missions in Iran, Syria, Lebanon and Indonesia are all temporarily shut.
The Italian minister who sparked off the Libyan protests, Roberto Calderoli, is a member of the anti-immigrant Northern League party.
He is also minister without portfolio in charge of institutional reform.
Earlier this week, Mr Calderoli said in an interview that it was "time to put an end to this story that we need to dialogue with these people".
Mr Berlusconi said he had contacted Umberto Bossi, leader of the Northern League, and both had agreed that Mr Calderoli should step down.Last Mod: 20 Eylül 2018, 18:16