Fierce fighting between the Nigerian armed group Boko Haram and security forces have driven more than 26,000 people from the northeastern town of Bama, witnesses and security sources have said.
The National Emergency Management Agency (NEMA) in Borno state said on Wednesday that 26,391 displaced persons had so far been registered.
"The number is growing by the hour," NEMA spokesman Abdulkadir Ibrahim said.
The government of Borno state, where Bama is located, said it still controlled the town.
Military spokesman Major General Chris Olukolade also denied reports of rebel victory over the city.
Local sources had earlier said the Boko Haram, which began its assault on Monday, had won control of much of Bama by Tuesday.
As that fighting wore on, news came that the armed group scored another victory on Tuesday by taking the smaller town of Bara, to the southwest roughly halfway between Maiduguri and the national capital Abuja, without firing a shot.
"They went preaching in the whole town, asking people to leave government work and join them to do the work of Allah," said Musa Abdullahi, who left Bara for Yobe state west of Borno.
The United States on Thursday said it was concerned by increasing Boko Haram violence and territorial gains in Nigeria.
We are very troubled by the apparent capture of Bama and the prospects for an attack on and in Maiduguri, which would impose a tremendous toll on the civilian population
"We are very troubled by the apparent capture of Bama and the prospects for an attack on and in Maiduguri, which would impose a tremendous toll on the civilian population," US Assistant Secretary of State, Linda Thomas-Greenfield, said on a visit to Abuja.
Thomas-Greenfield, who leads Washington's African Affairs team, told delegates at a bilateral meeting on regional security that the upsurge in violence "constitutes a serious threat" to Nigeria.
Boko Haram's attacks appear to have shifted focus in recent weeks away from creating mayhem to taking ground and holding it, a strategy analysts say could be inspired by the Islamic State's example of declaring a caliphate in Syria and Iraq.
Last month, the armed group captured the remote farming town of Gwoza, along the Cameroon border, during heavy fighting. The group's leader Abubakar Shekau declared in a video that the town was now "Muslim territory".
Capturing Bama would bring the rebels closer to the Borno state capital, Maiduguri, which is the birthplace of the Boko Haram movement.
Fears that Maiduguri could be the next target led the government to extend an overnight curfew there.
Boko Haram, a movement whose name means "western education is forbidden", has killed thousands since launching an uprising in 2009 to establish an Islamic state in religiously mixed Nigeria. They are by far the main security threat to Africa's biggest economy.
More than 700,000 people have been displaced externally and internally by the conflict, the United Nations refugee agency UNHCR says.