Security forces have been given permission to use gunfire to try to dispease the fighting.
Nawaz Sharif, the former prime minister, has raised the possibility of Indian instigation of the violence in Karachi as a response to last week's assault in Mumbai, which New Delhi has linked to Islamabad, although the government has not suggested any link.
Sharif said he was surprised by the timing of the Karachi violence.
"The killings in Karachi erupted suddenly after the Mumbai incident," Sharif told reporters. "I'm surprised how it erupted all of a sudden ... I think this needs to be looked in to thoroughly, which forces are involved in it."
All schools and colleges in Karachi were shut for a second day on Tuesday and public transport was thin.
Karachi has a long history of political, ethnic and religious violence. The latest clashes between ethnic-based factions have raised fears of a return to the chronic bloodshed that plagued the city in the 1990s.
Authorities said on Monday that the battles were between Muttahida Qaumi Movement (MQM) ruling coalition and the Pashtun Awami National Party (ANP), although both parties denied.