"A clash is ongoing", said Cambodian government spokesman Khieu Kanharith without elaborating.

A Cambodian soldier stationed near the ancient Preah Vihear temple, which is claimed by both sides, told AFP by telephone fighting had broken out. Gunfire could be heard in the background.

Reports said artillery was being used, but it was not clear by which side, or whether both were doing so.

A Thai army official at the border also confirmed the skirmish, which follows reports of a military buildup on both sides of the border in recent days.

He said fighting broke out at 3.10pm local time (0810 GMT) at Phu Makuea, near the 11th-century temple.

"The fighting is still going on," the official said. "We don't have any details or casualties yet."

Residents in nine villages along the Thai side of the frontier have been asked to take shelter or leave the area, said a senior district official at Kantharalak in the border province of Si Sa Ket.

"I can still hear artillery shelling but don't know from which side," he said.

Thailand’s Foreign Minister Kasit Piromya is currently in Cambodia for talks with his Cambodian counterpart.

Tensions between the two countries have flared in recent weeks in the wake of the arrest of seven Thai nationals for illegal entry into Cambodia in late December.

Five of the group were given suspended sentences and have since returned to Thailand.

The other two, high-profile nationalist activist Veera Somkwamkid and his secretary, were sentenced to lengthy jail terms for illegal entry into Cambodia, trespassing on a military area and spying, in a case that has caused outrage among Thailand's "Yellow Shirts".

Kasit is also due to visit Veera in jail.

Both sides have been talking tough on the border issue, which some observers say serves nationalist goals at home on both sides.

A foreign observer expressed surprise at the clash as both armies had appeared to be keen to ease hostilities.

"They will try to calm any increase in tensions coming from the politicians. They do not want to fight, especially not over politics," he said.

Ties between the neighbouring countries have been strained since July 2008 by a series of deadly border clashes over land surrounding the temple after it was granted UN World Heritage status.

The World Court ruled in 1962 that Preah Vihear itself belonged to Cambodia, although its main entrance lies in Thailand. The exact boundary through the surrounding grounds remains in dispute.

The Thai-Cambodia border has never been fully demarcated, partly because it is littered with landmines left over from decades of war in Cambodia.

Hundreds of Yellow Shirts have camped out around Government House in Bangkok since last week, demonstrating against its handling of the border dispute, and the group plans a larger rally on Saturday.

Yellow Shirts are a force to be reckoned with in Thailand's colour-coded politics and have helped to claim the scalps of three governments in under five years, including that of fugitive former premier Thaksin Shinawatra.