Hundreds of people fled a Burma Army (BA) attack on a Karen National Union (KNU) controlled town in Myawaddy Township on Wednesday, home to many returning Karen refugees from Thailand and more recently, members of the ousted government, striking workers and protesters fleeing regime persecution.

The military wing of the KNU, the Karen National Liberation Army (KNLA), clashed with invading BA soldiers a day after its Light Infantry Brigade 560 raided Lay Kay Kaw on Tuesday and abducted a number of people, including National League for Democracy MP Wai Lin Aung, as they searched the town for anti-regime activists.

According to the Karen Information Centre, locals said the military fired about 20 artillery shells 15 December at an area of the town where they suspected members of the People's Defence Force (PDF).

"About 400 people fled to nearby Takalu and Leh Wah Khee villages," a local from Lay Kay Kaw town told NMG, preferring not to give his name. "They (BA) entered Lay Kay Kaw from the mountain. Fighting broke out immediately in wards 3 and 6 around 10:30am and is still going on.'' Residents fear that the fighting will continue after the BA called for reinforcements.

Lay Kay Kaw, supported by Japan's Nippon Foundation, was established in February 2015 to house returning refugees from Thailand and internally displaced persons along the border after the KNU signed a union-level peace agreement with Thein Sein's government several years earlier. Over 3,000 people from 786 families have moved to the town, which is controlled by KNLA's Brigade 6 and located 15 km south of the border town of Myawaddy.

''The Burma Army is searching for PDF members in Lay Kay Kaw, but this area is controlled by the KNU/KNLA... That is why the tensions are so high,'' the source told NMG.