Army officials said they repelled the dawn raid on their positions near the Mugunga camp 10 km (6 miles) from the provincial capital, Goma, killing 27 fighters loyal to renegade General Laurent Nkunda.

Witnesses in the camp reported heavy gunfire and exploding mortars nearby at midday, as helicopter gunships from Congo's U.N. peacekeeping mission (MONUC) patrolled the area.

"There's a massive movement of displaced towards Goma. It's thousands of people. They're packed onto the road, carrying whatever they can," Aya Shneerson, director of the U.N.'s World Food Programme in Goma, told Reuters by telephone on the main road from the camps into the city.

A military spokesman for Nkunda denied his forces had anything to do with the attack.

More than 370,000 people have fled fighting in North Kivu between government soldiers, Nkunda's insurgents, Rwandan Hutu rebels and local Mai Mai militia since the beginning of the year.

Some 25,000 had taken refuge in two camps near Goma, close to the Rwandan border, that were emptied by Tuesday's fighting.

"I saw the soldiers moving towards where the enemies had come. Three civilians were killed -- a man, a woman, and a child. I saw them," said Prince Shamishungu as he fled Mugunga. "I don't know how this violence will end. We are suffering."

Nkunda has waged a campaign against government forces since August, when he abandoned a January peace deal and pulled thousands of his fighters out of special mixed army brigades.

"They did this to show that (the army) is not capable of protecting the people. That was their objective," General Vainqueur Mayala, the army's top commander in North Kivu, told Reuters by phone from the scene of the fighting.

PEACE EFFORTS

Tuesday's fighting followed diplomatic pressure to find a peaceful solution to the crisis in North Kivu, which some fear could escalate to full-scale war. Both the U.N. and U.S. have sent high-level delegations to North Kivu this month.

On Saturday, Congo and Rwanda agreed to collaborate to rid eastern Congo of the Hutu-dominated rebel Democratic Forces for the Liberation of Rwanda (FDLR), whose presence is a cause of the current crisis.

Nkunda led around 4,000 troops into the bush in 2004, saying he was protecting the small Tutsi minority against the FDLR.

He claims the Rwandan rebels, composed in part of ex-Rwandan soldiers and the Interahamwe militia responsible for the 1994 Rwandan genocide that killed an estimated 800,000 Tutsis and moderate Hutus, are receiving the backing of Congo's army.

"The government has a deal with the FDLR. They must renounce it and publicly declare them their enemies. If they do that, we'll see it as a big step forward," Nkunda's spokesman, Major Seraphin Mirindi, told Reuters.

Congo denies supporting the FDLR. Congolese army officers have, in turn, accused Rwanda of supporting Nkunda's insurgency.

Rwanda has twice used the pursuit of the FDLR as a pretext for military intervention. A 1998 Rwandan invasion helped spark a five-year war that killed an estimated 4 million people, mainly through hunger and disease.