Government forces, supported by Ethiopian soldiers, began digging trenches around their base in fear of a possible attack, witnesses said, as their rivals from the Islamic courts cut off their fuel supplies.
Hassan Turki, a top official from the Islamic courts, told HornAfrik radio on Wednesday that they planned to attack Baidoa, the only town in southern Somalia that the government still controls.
He said: "My colleagues always hide something, but I want to make it clear that we will attack Baidoa and many other areas because our aim is to implement Islamic rule throughout Somalia."
Over the past five months the Islamic courts have seized control of much of southern Somalia.
Another Islamic courts official, speaking on condition of anonymity because he was not authorised to speak to the media, said they planned to attack Baidoa within the next 48 hours.
But Abdirahman Janaqow, another top Islamic courts official, said that were no plans to attack the town.
Thousands of fighters from both sides are reported to be within striking distance of each other.
Officials from the Islamic courts have said that the group have recruited 2,000 fighters in recent weeks through training camps they have established.
Government forces have taken defensive positions 18km outside Baidoa while fighters from the courts have moved within the past 24 hours to Moode Moode, 20km outside Baidoa, Gedow Awale Golade, a businessman in the region said.
Fuel supplies to Baidoa were stopped on Monday, a businessman told the Associated Press.
Mohamed Sanweyne, a Mogadishu-based businessman, said: "The Islamic courts militia on the ground has informed us not to send fuel supplies to Baidoa."