Somali people sit behind wall where they seek refuge overnight in the capital Mogadishu. (Reuters)

Most of the dead were civilians and the latest fatalities included a pregnant woman and three children whose house was hit by a mortar.

In another incident, one witness said he saw mortars hit a house twice, killing five members of the same family, including two children.

"Sisi has been turned into a battleground. So many houses have been shelled and hundreds of residents are fleeing. It's a catastrophe," said Siyad Mohamed, a militia leader linked to the Islamic side.

"The death toll will definitely rise."

Farhan Gure, a resident living near Sisi, said: "Many people fear there will be worse fighting on Thursday night ... we have never witnessed such a battle before."

Thousands of civilians fled the most-affected Huriwa, Yaqshid, Waharaade and Sisi neighborhoods, leaving up to 70 percent of homes empty amid the continuing chaos, residents said.

"There is very heavy fighting here with huge shelling," Huriwa resident Abdinasir Mohamed told Agence France-Presse (AFP) Thursday.

"We haven't seen many fighters today but the shelling has been going on since last night. We don't know what to do."

"We don't know where to go, where is safe," said shopowner Maryan Ibrahim.

"There is violence in many parts of the city and we are anticipating more. Huriwa is bad, Sisi is the worst and Karin is also bad."

Ali Nur, a member of the warlords' militia, said the fighting could go on for days.

"It looks like we will continue until a clear winner emerges," he said.

Residents say neither side has gained the upper hand in heavy fighting that underlines the anarchy that has gripped Somalia since warlords ousted president Mohamed Siad Barre in 1991 before turning against each other.

A fledgling interim government led by President Abdullahi Yusuf has lacked the authority or resources to make a difference to the lives of ordinary Somalis since it was formed in 2004 and is too weak to return to Mogadishu from its base in Baidoa.

Undermined by internal splits, Yusuf's government includes some Mogadishu warlords and some allies of the Islamic courts.

Blame Game

Both sides of the battle blamed one another for the ongoing violence.

"Most of the indiscriminate shelling is coming from the so-called Islamic courts who have no regard for humanity," alliance spokesman Hussein Gutale Raghe told AFP, adding that his group would fight until the Islamists were defeated.

The appeals and an offer of a truce from Islamist leaders were dismissed by the warlord-led Alliance.

Influential Islamist Sheik Dahir Aweys accused Washington of backing the warlords to avenge the killing of American soldiers in Mogadishu in the 1990s during a UN peacekeeping mission that ended in humiliation.

An official of Mogadishu's courts, which UN experts believe now control of about 80 percent of the capital, also placed the blame squarely on the alliance.

"You know who is paid to kill Somalis by outsiders," the official told AFP. "The courts are out to save the Islamic people of Somalia, and our ceasefire offer was rejected by the so-called alliance."

Although Washington has not explicitly confirmed its support for the alliance, US officials have told AFP the group has received US money and is one of several it is working with to contain the threat of Islamists.

Last week, the State Department acknowledged that the United States was working with "responsible individuals" in Somalia to prevent "terror taking root in the Horn of Africa."