An uncertain number of people are feared dead and property destroyed as members of Eastern Security Network set up by the Indigenous Peoples of Biafra (IPOB) clashed with a combined team of police and soldiers in Orlu, Imo state.
The crisis had been brewing since last week after a clash between ESN volunteers and police resulted in deaths.
The security agencies were then said to have planned a reprisal.
Witnesses report sporadic shooting and residents took cover to avoid stray bullets. The shooting was heard as far as neighbouring communities of Okporo, Akata and Umutanze.
The soldiers were said to be drawn from the 34 Artillery Brigade in Obinze
Correspondents in Imo report panic in Orlu, where many residents have already fled.
Military checkpoints have been erected on roads and travellers are being advised to avoid using Orlu road or even move about by night.
One witness told correspondents he counted 16 low-flying aircraft over the town.
The group had released a video, which went viral last week, showing ESN volunteers boasting how they dislodged security men who attacked them and displayed the vehicles the policemen had abandoned while escaping.