Armenian and Azerbaijani forces were engaged in fierce clashes Saturday as fighting over the disputed Nagorno-Karabakh region intensified, with Armenia reporting heavy losses and its leader saying it was facing a historic threat.

Armenia's defence ministry said separatist forces had repelled a massive attack by Azerbaijan, seven days after new fighting erupted in the decades-old dispute over the ethnic-Armenian breakaway province.

Armenian-backed separatist fighters in Karabakh destroyed a "huge military grouping," of Azerbaijan's forces, defence ministry spokeswoman Shushan Stepanyan said, claiming to have inflicted "serious losses in manpower and military hardware".

But Armenia also announced the deaths of 51 more separatist fighters, increasing the number of fatalities on both sides above 240 after nearly a week of fighting.

Azerbaijan's defence ministry said its forces had "captured new footholds" and that the Armenians had "suffered serious losses in manpower and military hardware".

In an address to the nation on Saturday, Prime Minister Nikol Pashinyan called on Armenians to unite.

"We are facing possibly the most decisive moment in our millennia-old history," Pashinyan said. 

"We all must dedicate ourselves to a singular goal: victory."

The clashes took place after the regional capital Stepanakert came under artillery and rocket fire on Friday, with at least one person reported dead. AFP journalists in the city heard more explosions on Saturday.

Residents hid in shelters and on Saturday were clearing wreckage and sweeping up the shattered glass windows of their homes and shops.

"This is a great sorrow for our community, for our people," Nelson Adamyan, a 65-year-old electrician, told AFP outside his damaged residential building.

"But we will stand for our freedom, we will always be free."

'Final battle' 

Both sides have been accused of hitting civilian areas, with Azerbaijan saying Saturday that Armenian artillery had shelled 19 of its settlements overnight.

The new fighting erupted on September 27 and mounting international calls for a halt to the hostilities and a return to negotiations have gone unanswered.

The leader of Karabakh, Arayik Harutyunyan, said he was going to join "intensive fighting" on the frontline.

"The time has come for the entire nation to become a powerful army," he told reporters. "This is our final battle, which we will certainly win."

Both sides have repeatedly claimed to be inflicting heavy losses.

The Armenian side has reported 209 military deaths and 14 civilian fatalities. Azerbaijan has reported 19 civilian deaths but has not confirmed any fatalities among its troops.

On a road between Armenia's capital Yerevan and Nagorno-Karabakh, an AFP journalist saw ambulances going in both directions and busses carrying families fleeing the fighting.

Volunteers were also travelling to bring Stepanakert residents to safety after the shelling.  

"We must come to their aid," volunteer Ani said, adding that she had dropped everything to help.

"We help our country as we can."

Russia, the United States and France -- whose leaders co-chair a mediation group that has failed to bring about a political resolution to the conflict -- this week called on the warring sides to immediately agree to a ceasefire.

Calls for recognition 

Armenia said Friday it was "ready to engage" with mediators but Azerbaijan -- which considers Karabakh under Armenian occupation -- has said Armenian forces must fully withdraw before a ceasefire can be brokered.

Karabakh's declaration of independence from Azerbaijan during the collapse of the Soviet Union sparked a war in the early 1990s that claimed 30,000 lives.

Talks to resolve the conflict have made little progress since a 1994 ceasefire agreement.

The breakaway province is not recognised as independent by any country -- including Armenia -- and Karabakh's foreign ministry said Saturday that only receiving official status from world leaders could resolve the military flare-up.  

International recognition, the ministry said, "is the only way towards peace and security in the region."

The fighting has threatened to balloon into a regional conflict drawing in powerful players like Russia and Turkey.

Iran on Saturday cautioned Armenia and Azerbaijan to keep the conflict within their own borders after reports that several mortar rounds had hit Iranian villages, injuring a six-year-old child.

Armenia is in a military alliance of former Soviet countries that is led by Moscow, which maintains a military base there, while NATO member Turkey has signalled its full support for Azerbaijan's military operations.

Yerevan has accused Turkey of dispatching mercenary fighters from Syria and Libya to the conflict -- an allegation confirmed and denounced by Russia and France.