Inconsistent gunfire continued on Monday afternoon in different parts of the city, despite 800 paramilitary troops being put out onto the streets to calm the situation.
Security forces had been given permission to use gunfire to try to dispease the fighting.
Authorities said that the battles were between the Muttahida Qaumi Movement (MQM) ruling coalition and the Pashtun Awami National Party (ANP), although both parties denied.
"We have deployed the maximum number of paramilitary troops in violence-ridden Orangi Town, where the situation is now under control," Major Mohammad Ali, spokesman of the paramilitary Rangers, said.
"Our troops are patrolling and checking the affected localities and helping the police control the situation," he said.
Assailants had committed arson on shops and houses, witnesses said.
Many residents were too scared to leave their homes and schools and petrol stations were shut to negate the risk of being damaged.
Prime Minister Yousuf Raza Gilani called for "strict action" from local authorities on Sunday and said "no one will be allowed to put at risk the lives and property of the people."
Many Pashtuns from Pakistan's North West Frontier Province have settled in Kerachi for employment, causing tensions with the ethnic MQM.