Sporadic gunbattles flared overnight between soldiers and fighters from the shadowy extremist group Fatah al-Islam in the Nahr al-Bared camp in northern Lebanon, where fears are mounting for the safety of refugees trapped inside.

Soldiers remain on full alert around Nahr al-Bared, which has been battered by the worst internal strife since Lebanon's 1975-1990 civil war, leaving residents facing dire shortages of water, electricity and food.

"There were rounds of gunbattles during the night, but this morning the situation is calm. There is an uneasy calm," a Lebanese army spokesman said.

Lebanese troops encircled the camp last Sunday, the first day of fierce gunbattles between the tiny Fatah al-Islam militia that has now killed 78 people, forced thousands to flee and trapped thousands more.

"The authorities have given Palestinian organisations until the middle of the week" to try to negotiate a settlement, a Lebanese government source said on condition of anonymity.