Myanmar's military is carrying out a sustained offensive involving fighter jets to regain control of a key town from an armed ethnic minority group, its fighters and residents said on Wednesday.

The Arakan Army moved into Pauktaw, a town of 20,000 people close to a crucial deepwater port in the capital of western Rakhine state, on 15 November.

It opened a new front in an offensive by an alliance of ethnic minority groups across northern Myanmar that has shocked the nation's junta, cut trade routes to neighbouring China and led to more than 330,000 people being displaced since last month.

Pauktaw has become one of the key battlegrounds, and residents contacted by Agence France-Presse on Wednesday reported heavy battles in and around the town, which is 25 kilometers from Sittwe, the state capital.

"They (the junta) have been firing heavy weapons at the town continuously," one resident told AFP by phone, requesting anonymity for security reasons.

"Yesterday a jet fighter dropped two bombs that started a fire," the resident who said they were sheltering in a nearby village, adding the blaze was still burning.

AFP has reported fighting in Pauktaw over the past two weeks. But the accounts from the residents, as well as a statement from the Arakan Army, provided the most detailed accounts of the battle for control of the town.

A resident of Sittwe said the military was shelling Pauktaw from bases around Sittwe.