Ethiopian helicopter gunships pounded what the Somali government says are rebel positions in the capital Mogadishu, killing more than 11 civilians.
Witnesses said several helicopters fired rockets and bombs, in the first use of aerial power in Mogadishu since the fighting began late last year between Ethiopian troops backing the fragile Somali government and rebels.
"Two helicopters flew over us. One was making a surveillance and the other one was dropping several bombs," said Qoje Omar Gesey, a resident of the capital.
Explosions and gunfire rattled around the streets from soon after dawn, breaking a fragile ceasefire declared last week.
Residents say hundreds of rebels armed with rocket launchers and machine guns are fighting with Ethiopian troops who are firing artillery and tank shells.
"Early in the morning, the government troops and Ethiopians attacked us," said one Islamist source involved in the fighting.
One terrified resident told Reuters: "I have not seen anything like this... Whenever the Ethiopians fire their big guns, all my windows and doors are shaking."
Correspondents say Ethiopian tanks, troops and helicopters are trying to take control of five key junctions.
The southern part of Mogadishu, where the fighting is going on, has become a no-go zone.
Somali government spokesman Muhammed Hussein says this is the start of a three-day operation to restore order in the capital.
Amid the chaos, one mortar hit a mosque, killing a baby boy there and beheading another teenage boy.
"My children sought refuge at a mosque when it was hit by a mortar shell. My son died and my daughter lost the toes on one of her feet," local police officer Hashim Hussein told Reuters.
The local Shabelle broadcaster said at least 11 people, mainly civilians, had been killed by stray bullets.
"The Ethiopian forces, who are now facing strong resistance, continue to shell," it said. "Helicopter gunships started bombardments in the rebel positions of the capital."
"Worst fighting"
Thursday's fighting is the worst since December when Ethiopian troops, backed by the United States, helped Somali forces oust the Islamists and install President Abdullahi Yusuf's interim government in the capital.
The Somali government blames Mogadishu's violence on remnants of the Union of Islamic Courts (UIC).
The capital's dominant clan Hawiye had brokered a truce at the weekend after a week that saw at least two dozen people killed, soldiers' bodies dragged in streets, and a plane crash probably due to a missile. Ethiopia denied reaching any truce deal.
Meanwhile, Ethiopian Prime Minister Meles Zenawi told parliament that two-thirds of the country's troops have withdrawn from Somalia.
He said the rest of Ethiopian forces would leave in consultation with the African Union.
Ethiopian troops have been gradually handing over responsibilities to the AU force that was deployed to Mogadishu this month to try and bring stability to the city.
Some 1,700 Ugandan troops are in Mogadishu as the advance group of a planned 8,000 strong AU force.
Somalia enjoyed a six months lull in violence that had engulfed the country in the past 16 years, when the UIC took power last year.
But insecurity has returned to the city.
The UN refugee agency estimates that 57,000 people have fled violence in Mogadishu since February, including more than 12,000 people who escaped last week.
"They are hungry and face harassment from thugs," the UN refugee agency said in a statement.
AJP and Agencies