At a gathering at the U.S. Institute of Peace in Washington Thursday, Powell was asked by a Libyan-American about U.S. diplomacy toward the Libyan regime.
"We have no illusions about Col. Gadhafi or the nature of his regime ... its non-democratic, totalitarian nature, and we will approach it in that light," Powell said.
Foreign Minister Abdel-Rahman Shalqam (search) called the remarks unacceptable and threatened legal action in a statement released Friday night and carried by the official news agency JANA.
"The Minister Colin Powell humiliated the people of Libya and therefore ... we will file a lawsuit against him," Shalqam was quoted as saying. "What he said is considered blasphemous and defamatory against Libyans."
He did not say where or how any such suit would be pursued.
Gadhafi has been in sole control in Libya since taking power in a 1969 military coup -- and at odds with the United States for much of that time.
Washington resumed direct diplomatic ties with Libya last month, inaugurating a U.S. liaison office in Tripoli after 24 years.
The continued improvement in Libyan-American relations came after Gadhafi's promise last year to dismantle his chemical, biological and nuclear weapons programs. However, Libya remains one of seven nations the United States has branded as sponsors of terrorism.