Congolese troops and M23 rebels bombarded each other near the Ugandan border on Monday and international envoys called on both sides to cease fire and allow a peace deal to take hold.
Congo's army accused the rebels of shelling the frontier town of Bunagana and said it showed M23's ceasefire declaration at the weekend was worthless.
The rebels said they were ready to sign a peace deal but that they had been attacked with heavy weapons.
A rapid army advance in the last few weeks has driven rebels from towns and cornered them in the steep, forested hills along the Ugandan border, raising the prospect of an end to a 20-month rebellion that has gripped Congo's mineral-rich east.
South Africa is hosting leaders from the Great Lakes region and southern Africa to back Ugandan-sponsored peace efforts, but the latest violence shows the Kinshasa government and the rebels remain far apart.
"This is not fighting, it is bombs launched by M23 targeting the population of Bunagana," Congo army spokesman Colonel Olivier Hamuli said by phone. "They are targeting civilians."
Bunagana was the last rebel-controlled town to be recaptured last week and rebels are still in the hills nearby. A Reuters reporter said government troops had seized Mbuzi, a strategic hilltop above Bunagana, on Monday after hitting it with tank and rocket fire. Seven rebels were captured, he said.
On Sunday M23 announced a ceasefire - a declaration Hamuli described as a lie, saying the army would pursue the rebels.
Citing Congolese military sources, United Nations-backed Radio Okapi said on its website that four civilians had been killed and 10 wounded in Bunagana on Monday.
ENVOYS PUSH PEACE DEAL
M23 complained that the army had attacked its positions in the hills with heavy weapons. "Our movement reiterates that we are ready to unconditionally sign the peace deal agreed on Sunday November 3 in Kampala as soon as the mediator in the dialogue sets a time for the ceremony," it said in a statement.
Envoys monitoring the conflict for the United Nations, European Union, African Union and United States jointly urged both sides not to undo progress made in the talks in Uganda, saying M23 should renounce its rebellion as agreed and the army should hold off from further military action for now.
The rebellion is the worst faced by President Joseph Kabila since the end of Congo's last major war a decade ago.
In an embarrassment to Kinshasa and the United Nations, M23 seized Goma, capital of North Kivu province, a year ago after troops fled and U.N. peacekeepers stopped protecting the town.
That prompted changes in Congo's army, a stronger U.N. mandate for a beefed-up peacekeeping force and intense pressure on Rwanda to end its alleged support for the rebels. Rwanda has repeatedly denied backing M23.
Congo's army has swept through towns across North Kivu in recent weeks though the advance has slowed as rebels retreated into the hills they used to launch their revolt last year.
Uganda said some shells from Congo had landed on its soil on Monday but that it was not clear who had fired them.
An U.N. official in Uganda said thousands of residents were fleeing and 17 had been killed by shrapnel.
"We were 4 km from the border and the explosions were so bad we had to pull back. The streets are full of people running from the fighting," said the U.N. refugee agency's representative in Uganda, Lucy Beck.