Mortars rained down on a crowded marketplace in a Palestinian refugee camp in the Syrian capital, killing 21 people as regime forces and rebels clashed on the southern outskirts of Damascus, activists have said.

The Syria Observatory for Human Rights, which reported the deaths, said the shells hit Yarmouk camp on Thursday as shoppers were buying food. The group would not speculate on who was firing.

"We don't know where the mortars came from, whether they were from the Syrian regime or not the Syrian regime," said Rami Abdul Rahman, director of the Observatory, which is based in the UK.

He added that they could also have been strays from the fighting in nearby Tadamon neighbourhood.

The state news agency blamed the bombardment on "terrorist mercenaries" - a term the government uses for rebel fighters - and said they had been chased away by security forces.

Government troops, however, have in the past attacked the camp, home to nearly 150,000 Palestinians and their descendants driven from their homes by the war surrounding Israel's 1948 creation.

Palestinian refugees in Syria have tried to stay out of the 17-month old uprising but with Yarmouk nestled among neighbourhoods sympathetic to the rebels, its residents were eventually drawn into the fighting.

Yarmouk's younger inhabitants have also been moved by the Arab Spring's calls for greater freedoms and have joined protests against President Bashar Assad's regime- and have died during demonstrations when Syrian troops fired on them.

The attack on the Palestinian camp came as clashes raged overnight between rebels and government forces in the nearby Damascus suburb of Tadamon, which was also bombed by the army on Thursday, sending plumes of black smoke over the city.

The Observatory also reported shelling of the southwestern suburb of Jdaidat Artouz, where dozens of bodies were found after government forces swept through on Wednesday.

Syria's civil war, which has raged across much of the country, came to the capital and northeastern city of Aleppo, Syria's main commercial hub, in July.

A rebel assault and revolt in Damascus two weeks ago was vigorously crushed by government forces but pockets of resistance and sympathetic neighbourhoods remain.

Sporadic clashes and shelling also continue in Aleppo, especially the rebel bastion of Salaheddine, as rebels and government forces hold different parts of the city.

On Thursday, the rebels even deployed a captured tank against the regime and briefly shelled an air force base outside Aleppo.

United Nations peacekeeping chief Herve Ladsous warned of a major government assault on Aleppo in the coming days to retake the rebel held neighbourhoods.

"The focus is now on Aleppo, where there has been a considerable build-up of military means, and where we have reason to believe that the main battle is about to start," he said.

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