Nine Palestinian civilians were killed in the shelling of the Nahr al-Bared camp in northern Lebanon where soldiers in tanks are battling militants from the shadowy Fatah al-Islam group, a camp medic said.

Plumes of thick black smoke rose from the camp, which has been turned into a war zone by ferocious gunbattles on Monday between soldiers and Fatah al-Islam, a group accused of links to al-Qaeda and Syrian intelligence services.

Representatives of the main Palestinian factions in Lebanon held talks with Prime Minister Fuad Siniora on Monday, offering their help to crush Islamic militants who triggered the bloodiest internal fighting since the civil war.

"We are open... to all the demands of the Lebanese state. We hope to cooperate in order to eliminate the Fatah Al-Islam phenomenon, on the condition innocent civilians do not pay a high price," said Abbas Ziki, Lebanon representative of the Palestine Liberation Organisation.

Lebanese leaders vowed they would take "all necessary measures" to restore order after the fighting that left 46 people on Sunday alone, while the international community appealed for an end to the violence.

As warships patrolled nearby coastal waters, troops were locked in heavy exchanges of artillery and machinegun fire with militants in Nahr al-Bared, where buildings have been burnt or destroyed, and officials are fearful for the plight of refugees. "We are deeply concerned about the developing humanitarian crisis, particularly the danger to civilian lives," UN Palestinian refugee agency director Richard Cook said.

Doctors have describing seeing bodies strewn on the streets of the Nahr al-Bared, which like all other refugee camps in Lebanon remain outside the control of the government and in the hands of Palestinian factions.

"The electricity has been cut, there's not much water and the camp's bakeries are shut," said Hajj Rifaat, an official from the mainstream Palestinian movement Fatah, which denies any links with Fatah al-Islam.

It is the worst explosion of violence -- excluding warfare with Israel -- since the 1975-1990 civil war and has raised fears about the stability of multi-confessional Lebanon, already in the grip of an acute political crisis.

A 63-year-old woman was also killed and 10 people wounded in Beirut's Christian district of Ashrafie in a bomb blast in a shopping centre car park on Sunday in what police said was a "terrorist attack."

On Sunday, Lebanese troops fought running battles with Fatah al-Islam militants in the camp and in Tripoli, staging a daylight assault on a building in the northern port city where fighters were holed up.

The army said the clashes erupted after militants staged an attack on a military post outside Nahr al-Bared, home to about 22,000 of Lebanon's estimated 400,000 Palestinian refugees.

In total on Sunday, 27 soldiers lost their lives and 17 gunmen were also reported killed, in addition to a civilian and a Palestinian refugee.

A senior security official said government forces found the bodies of 10 Islamists, including Saddam Hajj Dib who was wanted over a plot to blow up trains in Germany last July, in the building stormed on Sunday.

Another was identified as Abu Yazan, Fatah Al-Islam's number three, who the official said was responsible for bus bombings in a Christian village in February that killed three people.

Local media reported that Arab nationals were among the casualties in the ranks of Fatah Al-Islam.

"We will not allow anyone to harm our unity and our determination to enforce law and order on all Lebanese territories and on all those living inside and outside the camps," Prime Minister Fuad Siniora said on Sunday.

His Western-backed government has been paralysed for months by an acute political crisis pitting opponents of former power broker Damascus against pro-Syrian factions.

The German presidency of the European Union condemned the bloodshed and called for the disarmament of militias in Lebanon while France voiced solidarity with the government.