Ethiopian forces and Tigrayan rebels fought a pitched battle for control of Kombolcha on Monday, terrified residents reported, after the rebels claimed to have taken over their second town in two days.
Reports of rebels capturing Kombolcha came a day after they claimed control of Dessie and if confirmed, it would mark a major advance by the Tigray People's Liberation Front (TPLF) in the nearly year-long war.
Much of northern Ethiopia is under a communications blackout and access for journalists is restricted, making battlefield claims difficult to independently verify.
Kombolcha residents described non-stop gunfire overnight and into the early hours on Monday, with some saying they heard what appeared to be an airstrike on the town's outskirts around midnight.
"The night was filled with many gunshots," said Mohammed, who like other locals declined to share his last name for safety reasons.
"I heard an air strike past midnight outside Kombolcha borders," he added.
Hamdiu, a shopkeeper in Kombolcha, told AFP he too heard what sounded like an air strike around midnight.
"Huge gunshots were heard until (this) morning", he said, with the rebels locked in combat with federal troops and local militias.
Over the past two weeks, Ethiopia's government has carried out a string of aerial bombardments in Tigray.
But so far no bombings have targeted the Amhara region, where Kombolcha and Dessie are located, with a government spokeswoman on Monday telling AFP: "There were no airstrikes in Kombolcha overnight."
Control of the skies, along with superior manpower, is one of the few remaining areas where the government holds a military advantage over the rebels.
AFP was unable to reach anyone in Dessie, where heavy fighting was reported on Sunday.
The rebels' offensive in the towns south of Addis Ababa has fuelled speculation that the TPLF was approaching Ethiopia's capital.
But the rebels' spokesman Getachew Reda said the TPLF, which dominated national politics for three decades until 2018, had no "other motive than breaking the deadly siege" on Tigray, which is in the throes of a severe humanitarian crisis.
Prime Minister Abiy Ahmed has urged Ethiopians to use "any type of weapons... to block the destructive TPLF, to overturn it and bury it".
"Dying for Ethiopia is a duty (for) all of us," he said.
The Amhara administration Sunday ordered all government institutions to suspend regular services and divert their budgets to "the survival campaign".
Elsewhere in Amhara, rebels from the Oromo Liberation Army -- who are allied with the TPLF -- announced Sunday that they had captured the town of Kemissie, south of Kombolcha and located on a major highway to Addis Ababa.
The conflict erupted last November when Abiy deployed troops in Tigray, promising a swift victory. But the operation instead spiralled into a prolonged war marked by massacres, mass rapes and a humanitarian crisis.