Georgian troops have launched artillery and rocket attacks on the South Ossetian capital Tskhinvali after surrounding the city.
Heavy fighting resumed after the collapse of a short-lived ceasefire, agreed yesterday.
Russian news agencies claim Georgian government forces launched an armoured assault on the city and say at least 15 people have died in the shelling.
Separatists vowed to repel the attack. Hundreds of volunteers from Russia and Georgia’s other breakaway region Abkhazia are said to be descending on the city
Days of sporadic clashes have raised fears of a new war in the Caucasus.
Georgian security officials have reported Russian army units moving towards a vital tunnel connecting South Ossetia with Russia.
Earlier, in a dramatic televised address, Georgian President Mikhail Saakashvili offered the separatists an immediate ceasefire.
“I offer you autonomy and self-government for South Ossetia, under international guarantee, according to international law, by which I mean autonomy corresponding to the standards of the European Union,” he said.
Backed financially and militarily by Moscow, South Ossetia renounced Georgian rule in the 1990s, while Georgia has allied itself with the West and is pushing for NATO membership.
Despite agreeing to Russian-mediated talks due to be held later today, fighting is said to have erupted again after a brief lull.
Explosions and gunfire could be heard late into the night, 100 kilometres north of the Georgian capital Tbilisi.