Malian troops and suspected Islamist militants are exchanging heavy gunfire on the streets of Gao in northern Mali.
A BBC correspondent in the town says the clashes began near the central police station but have since spread.
It comes a day after a suicide bomber blew himself up near a checkpoint at a northern entrance to the town – the second such attack in two days.
Gao was retaken just over two weeks ago by French and Malian forces, who supposedly drove out the Islamists.
Security had reportedly been tightened in the wake of the suicide bombings, with military patrols stepped up and checkpoints put in place.
It is not yet known which group was involved in Sunday’s clashes.
However, the Movement for Oneness and Jihad in West Africa (Mujao) has said it was behind the suicide attack on Friday, which injured a soldier, and threatened more.
“We are dedicating ourselves to carrying out more attacks against France and its allies. We ask the local population to stay far away from military zones and avoid explosions,” spokesman Abou Walid Sahraoui said.
The BBC’s Tomas Fessy, in Gao, says Sunday’s gun battle appears to have started around the main police station in the town centre, but there is now heavy gunfire coming from different areas.
A Malian soldier holding one army position told him that some gunmen were driving around on motorbikes.
Our correspondent says people are barricaded inside their houses and the situation remains unclear.
However, worries that Islamist militants had infiltrated Gao seems to have become reality, as they are waging a guerrilla war in the town, he adds.
There was no immediate comment from the Malian and French militaries.