There were no indications that the dead men had been fighters and some were reported as wearing work overalls.
The unrest has raised fears of further fighting.
Rutshuru, a town close to Kiwanja, was seized last week by General Laurent Nkunda's Tutsi rebels who are fighting Congolese government forces.
Hundreds of civilians have taken shelter at a ruined primary school close to a UN peacekeepers' camp. Smoke rose from nearby.
Forces loyal to Nkunda were reported to have driven Mai-Mai malitiamen out of Kiwanja on Wednesday, causing residents to flee.
|Obasanjo, the UN envoy to eastern Congo, is to mediate talks on the conflict [GALLO/GETTY]
UN peacekeepers said they had launched an operation around the town, to try to halt the fighting.
They also said they would secure the release of a Belgian journalist working for a German newspaper, whom UN said had been seized by the Mai-Mai militiamen.
The North Kivu government army commander blamed the militia for the clashes and said his own forces would respect the ceasefire.
Al Jazeera's Mohammed Adow, reporting from the DR Congo, said the newly appointed Congolese prime minister intimated the government was ready to listen to "Nkunda and other dissident groups".
"The announcement that the government is ready to talk peace with Nkunda will come as a relief to the more than 600,000 residents [of Goma]. With rebels just 12km away, the city is virtually under siege and there are already shortages of food and medical supplies," he said.
On Wednesday, Nkunda said he was upholding the ceasefire he declared last week after halting his forces' advance towards Goma, where aid agencies are struggling to help some of an estimated million refugees displaced by two years of conflict in North Kivu.
"It's still being maintained," Nkunda told Reuters by telephone from his hilltop headquarters in North Kivu.
Arthur Kepel, an analyst with the International Crisis Group in Congo's capital, Kinshasa, told Al Jazeera that it was "very significant" that the goverment is willing to enter talks with the rebels.
"It is only through dialogue that the ceasefire can be implemented ... it is really the answer if one has to stop this crisis," he said.
Ban Ki-Moon, the UN secretary-general, said he would attend a Great Lakes summit on Friday in Kenya's capital Nairobi to address the crisis in the Congo.
He said he would meet Joseph Kabila, the Congolese president, and his Rwandan counterpart, Paul Kagame, to try to urge them to speak with Nkunda and anyone else who could help end the crisis.
Olusegun Obasanjo, Nigeria's former president who is Ban's newly nominated special envoy for east Congo, told Reuters he would meet both presidents in Nairobi to see how to end the violence.
"Do we need a stronger mandate or do we need a reassessment and redeployment to meet the challenges on the ground? ... the meeting I am having will clarify things a little bit," he said.
The conflict in eastern Congo, which persists years after the end of a wider 1998-2003 war, is fuelled by ethnic hatred left over from Rwanda's 1994 genocide.
Nkunda claims the Congolese government has not protected ethnic Tutsis from the Rwandan Hutu militia that escaped to Congo after helping slaughter a half-million Rwandan Tutsis.
Nkunda, who defected from the army in 2004, now says he is fighting to liberate all of Congo from a corrupt government.
He went on the offensive on August 28 and brought his fighters to the edge of Goma last week before declaring a unilateral ceasefire.
Congo and Rwanda have accused each other of supporting feuding rebel and militia groups.