In an interview with Reuters, Khattala said he was at the consulate during the attack, but denied playing any part in orchestrating the strike that ended with the deaths of four Americans including Ambassador Chris Stevens.
One Libyan official within the country's Interior Ministry told Reuters on Thursday that local authorities knew about Khattala's participation in Benghazi, noting that he was photographed at the Consulate during the attack.
But aside from the photo, Libyan authorities had little evidence to make an arrest, according to the official.
"There were many people there from Ansar al-Sharia, from other brigades and from the general public," the official said.
"Just because someone is there doesn't mean they were behind it," the official added.
Khatalla is one of a handful of suspected Islamic militants U.S. military and intelligence are looking into regarding the consulate raid.
American special operations forces have already been sent to Libya and neighboring countries, collecting intelligence on terror cells tied to the Sept. 11 strike.
That work is part of a alleged White House counterstrike plan being drafted to target those responsible for the assault.
The Pentagon's elite Joint Special Operations Command, in conjunction with the CIA and other U.S. intelligence agencies, is assembling "target packages" on suspected militants associated with the attack.
Counterstrike operations could run the gamut from armed drone strikes to covert kill or capture raids similar to the Osama bin Laden mission in Abbottabad, Pakistan, that ended with the al Qaeda leader's death.
The Pentagon has already deployed two Arleigh Burke-class destroyers, the USS Laboon and USS McFaul, armed with Tomahawk cruise missiles to the coastal waters near Libya.
Khatallah denied being the leader of Ansar al-Sharia but admitted having close ties to many of the groups members, telling Reuters he was surprised at recent reports naming him as a potential target of U.S. forces.
"These reports say that no one knows where I am and that I am hiding," he told Reuters. "But here I am in the open, sitting in a hotel with you. I'm even going to pick up my sister's kids from school soon."