Somali Islamic Courts Uninion said Saturday their fighters had captured a frontline position from Ethiopian-backed government forces as a fourth day of bloody battles raged in the lawless nation's southern region.

Islamic Courts information chief Abdurahim Ali Muddey said their fighters had seized the Idale outpost, some 60 kilometres (40 miles) south of Baidoa, the seat of the interim government which is being backed by Ethiopian troops.

"Our Islamic fighters have taken control of Idale and are heading to other parts where Tigray (Ethiopian) invaders are now based, by the will of God, we will liberate our people and country from the Ethiopian invaders," he said.

"They (Ethiopians) attacked us three times this morning and each time, we pushed them back," the Islamists' security chief Sheikh Yusuf Mohamed Siad Indo'adhe told a press conference.

Information Minister Ali Jama did not confirm the seizure, but acknowledged that "fighting is raging in Idale."

The fresh violence drew calls for restraint from the international community, with the United Nations and African Union regional grouping urging an immediate end to the fighting.

Ethiopia is supporting Somalia's weakened government against the Islamist forces, which control the capital Mogadishu and much of the rest of the war-ravaged Horn of Africa nation.

Fighting erupted early Wednesday, hours after the expiry of an Islamist-imposed ultimatum to Ethiopia to withdraw the thousands of troops the Islamic Courts say Addis Ababa has deployed in the country.

The International Committee of the Red Cross (ICRC) said the fighting had left "dozens" dead.

For its part the government says its Ethiopian-backed forces have splayed more than 500 Islamist fighters since Wednesday, while the Islamic Courts spoke of killing at least 70 enemy combatants.

Muddey said Islamic Courts forces were pushing back the Ethiopian-backed troops.

"This war is between Somalia and Tigray invaders. The forces have been pressed and they are losing in the battlefields," he added.

"The invaders have been repelled, we have a lot of their bodies here and are going to show the media, we have their ID cards, pictures with their wives and other equipment," he said.

The fighting on twin fronts has forced thousands of residents to flee.

"People are really scared because both sides are using heavy artillery shells and other weapons," Haji Hassan Dhubow, a resident of Goof Gaduud village southwest of Baidoa, said.

"I have seen many people fleeing with their children," he said.

Witnesses said Ethiopian tanks faced off with Islamic fighters in Daynunay, a flashpoint garrison town about 30 kilometres to the east of Baidoa, but there was no direct confrontation.

The fighting and war of words have come despite a statement by European Commission humanitarian chief Louis Michel on Wednesday that he had secured the commitment of both sides to observe a truce and resume peace talks.

Ethiopia is supporting Somalia's weaken provisional government against the Islamic forces, which control the capital Mogadishu and much of the rest of the Horn of Africa nation.