Georgian forces and separatists in breakaway South Ossetia broke a ceasefire just hours after the two sides had agreed to talks today.
"Separatists opened fire at the two Georgian villages of Prisi and Tamarasheni, and we had to return fire," the secretary of the Georgian National Security Council Kakha Lomaia said.
A Reuters reporter could hear and see intense fire from heavy weapons in different locations late yesterday. The night sky was lit up blue and red by explosions.
"According to our information, some military units of the Russian army are apoproaching Roki tunnel," Mr Lomaia said, referring to a route which connects South Ossetia with Russia.
The tunnel is not controlled by Georgia, which says it fears Russia could use it to supply weapons to the region.
Days of heavy fighting have raised fears of new war in the volatile Caucasus. In a dramatic address, Georgian President Mikheil Saakashvili yesterday had offered the separatists an immediate ceasefire following fighting in which Tbilisi said up to 10 Georgian peacekeepers and civilians had been killed.
Separatists said two civilians were killed.
Moscow said the two sides had agreed to talk at the Russian peacekeeping base in the separatist capital Tskhinvali today.
The US, European Union and United Nations all called for calm and dialogue.
South Ossetia and Abkhazia enjoy Russian political and financial backing, but ex-Soviet Georgia has allied itself with the West and is pushing for Nato membership. The country lies at the heart of a region emerging as a vital energy transit route.
"I offer you an immediate ceasefire and the immediate beginning of talks," Mr Saakashvili said in a televised address.
He said he had issued an order not to retaliate.
"It was a painful decision, but we have suffered casualties and villagers' homes have been damaged," he said. Mr Saakashvili repeated an offer of full autonomy for the breakaway region, with Russia as the guarantor.
UN Secretary-General Ban Ki-moon called on the two sides to refrain from any action that could escalate the situation.
EU foreign policy chief Javier Solana discussed the situation by telephone with Mr Saakashvili.
"Solana expressed his serious concern about the situation in South Ossetia and called for every effort to be made to rapidly end the violence and resume peaceful talks between the sides," an EU statement said.
An attempt at direct talks yesterday never got off the ground. The two sides are at loggerheads over the format of negotiations, with Tbilisi pushing for direct talks with greater involvement by the West.
A security source said Georgian special police units and a mechanised army brigade had moved to Gori town on the doorstep of South Ossetia. A field hospital was set up on the main road and buses filled with Georgian soldiers stood in convoy.