Chadian forces have used tanks and helicopter gunships to try to drive back rebels besieging the presidential palace in the capital N'Djamena.
Aid agency MSF told the BBC there were "a lot of dead bodies" in the city, and 300 people being treated in hospitals.
The rebels, who want to overthrow President Idriss Deby, seized large parts of the city on Saturday.
Correspondents say the crisis could have major implications for efforts to end the conflict in Darfur.
Aid agency MSF told the BBC there were "a lot of dead bodies" in the city, and 300 people being treated in hospitals.
The rebels, who want to overthrow President Idriss Deby, seized large parts of the city on Saturday.
Correspondents say the crisis could have major implications for efforts to end the conflict in Darfur.
Witnesses heard anti-tank and automatic weapons fire coming from the city centre, starting at about 0500 local time (0400 GMT) on Sunday.
French Defence Minister Herve Morin said President Deby, who is believed to be inside the palace, still had 2,000 to 3,000 men under his authority, despite rebel claims that government troops were defecting.
A spokesman for the rebels said they had also taken the eastern town of Adre, near the border with Sudan, an area where some 400,000 people displaced as a result of the conflict in Darfur are living in camps.
French Defence Minister Herve Morin said President Deby, who is believed to be inside the palace, still had 2,000 to 3,000 men under his authority, despite rebel claims that government troops were defecting.
A spokesman for the rebels said they had also taken the eastern town of Adre, near the border with Sudan, an area where some 400,000 people displaced as a result of the conflict in Darfur are living in camps.
But the government said it had beaten back that attack, and claimed the assault had been backed by Sudanese aircraft.
Sudan has denied it is involved in any of the fighting in Chad.
Correspondents say Sudan is known to have supported rebels in Chad in the past - while Chad has backed rebels in the Sudanese province of Darfur.
Adre is in the area where a French-dominated EU peacekeeping force is due to deploy to protect displaced civilians and the aid workers supporting them.
Chadian officials have accused the rebels of seeking to stop the deployment of the EU force.
Sudan has denied it is involved in any of the fighting in Chad.
Correspondents say Sudan is known to have supported rebels in Chad in the past - while Chad has backed rebels in the Sudanese province of Darfur.
Adre is in the area where a French-dominated EU peacekeeping force is due to deploy to protect displaced civilians and the aid workers supporting them.
Chadian officials have accused the rebels of seeking to stop the deployment of the EU force.
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