Sudanese rebels on Sunday said they were fighting inside a strategic border town in Blue Nile state for the first time since its seizure by the army more than a year ago.
The army denied that rebels had entered Kurmuk, on the Ethiopian frontier, which is the third-largest town in Blue Nile and has been in government hands since November 2011.
"We pushed them from Mufu and now we are fighting inside the city", in Kurmuk's southwest, said Arnu Ngutulu Lodi, spokesman for the Sudan People's Liberation Movement-North (SPLM-N).
The army last week announced it had "liberated" Mufu, southwest of Kurmuk, and then two days later said its forces had withdrawn.
Army spokesman Sawarmi Khaled Saad said on Sunday that the rebels were not near Kurmuk and their claim was a "fabrication" designed to affect army morale.
Khartoum accuses neighbouring South Sudan of backing the SPLM-N in Blue Nile and in South Kordofan state, where insurgencies erupted in 2011.
South Sudan denies such support.
The rebels' statement comes as international concern rises over tensions between Khartoum and the South Sudanese government in Juba. The two countries failed to implement agreements, including a demilitarised border zone, which they hailed in September as ending a cross-border conflict.
Access to Blue Nile is extremely restricted, making the rebels' claim almost impossible to verify.
"I'm not sure it's true," a regional political expert said. "There are no independent observers. They can say what they want."
But the expert, asking for anonymity, admitted the possibility of "a serious battle" for control of the town which is an important trading centre and was a key battleground during Sudan's 22-year civil war.
SPLM-N fighters were allies of southern rebels during the civil war which led to South Sudan's independence two years ago under a 2005 peace agreement.
The agreement failed to settle the role of ethnically diverse Blue Nile and South Kordofan within Sudan.
The Sudanese Armed Forces (SAF) retook Kurmuk in November 2011 two months after fighting began with the SPLM-N.
"Kurmuk is very well-defended," the expert said. "It was very difficult for SAF to re-control and they would like to keep it, because it's a very strategic place."
The war in Blue Nile has generally not been as intense as the one in South Kordofan. An analyst said earlier that the Blue Nile rebels were at "great disadvantage" there, partly because of the terrain.
But over the past week the SPLM-N has reported intensified fighting.
Yasir Arman, the group's secretary general, on February 17 accused the armed forces of launching "a military dry season campaign" in an area about 20 kilometres (12 miles) southwest of Kurmuk.
He said there had been "heavy aerial bombardment from Sudan's air force", prompting 8,000 people to flee towards the borders of South Sudan and Ethiopia.
The army denies bombing civilians.
Last Wednesday the rebels said they were just a few kilometres from Kurmuk, and claimed to have seized an airstrip on the outskirts.
Figures from the humanitarian wing of the rebels, along with data from the government's aid agency, indicate more than one million people have been affected by the fighting in Blue Nile and South Kordofan states.