Two children have been killed and eight other civilians wounded after a barrage of shells struck the capital of Sudan's Southern Kordofan state.
Army spokesman al-Sawarmi Khalid told Reuters news agency that the rebels had shelled an army garrison outside Kadugli but that some shells had landed inside the town.
"The attack led to the killing of two children and eight civilians were wounded," he said, adding that the army had launched an operation a few days ago to "cleanse" the area around Kadugli of rebels.
Sudanese rebels said they had shelled the main city in the oil-producing Southern Kordofan state near the border with South Sudan on Tuesday after coming under artillery fire from government troops, the third bout of shelling in the past two weeks.
Sudan's army has been fighting SPLM-North rebels in the state since June last year, shortly before South Sudan seceded from Sudan, but the Southern Kordofan capital Kadugli has been mostly isolated from the fighting.
"The government and our troops have been shelling each other since this morning," SPLM-North spokesman Arnu Lodi said.
"They have been shelling our forces based outside Kadugli from inside the town and we are shooting back in self-defence."
Witnesses said that shells started to come from outside the town, concentrating on the town centre.
"I heard about 20 explosions and I saw one shell hit a road-building company," a Kadugli resident told AFP news agency without giving his name.
"Now most of the residents are fleeing the town centre."
Events in Sudan's border states are hard to verify as the government bans foreign media from travelling there.
Fighting in Southern Kordofan and nearby Blue Nile state has displaced or severely affected 900,000 people, the United Nations said on Friday. Sudan agreed in August to let aid into rebel-held areas but the United Nations has been unable to win government approval to go ahead with distributing food.
Under international pressure, Sudan and South Sudan agreed last month to establish a buffer zone along their border after clashing along it several times in the past year. Indirect talks between Khartoum and the rebels, however, have made scant progress.