Georgia has offered the separatist South Ossetian authorities an immediate ceasefire to stop escalating fighting.
Georgian forces and South Ossetian separatists are exchanging heavy fire just hours after agreeing to a ceasefire and Russian-mediated talks.
"I offer you an immediate ceasefire and the immediate beginning of talks," said Georgian President Mikheil Saakashvili, quoted by Reuters news agency.
Fighting broke out after a brief lull in a day of heavy gunfire and shelling.
Both sides said their forces exchanged heavy fire near the town of Tskhinvali in South Ossetia on Thursday.
Up to 10 Georgian peacekeepers and civilians have died, Georgia's interior ministry told Reuters news agency.
Fighting resumed after overnight shelling, with at least 20 people injured, local officials said.
Russia, which has close ties with South Ossetia, says Georgia is building up its forces to seize the breakaway province, a claim Georgia denies.
A South Ossetian report spoke of 18 wounded.
Days of heavy fighting have raised fears of new war in the volatile Caucasus.
In addition, Georgia said at least two of its troops were injured and one of its armoured vehicles destroyed. It said the village of Avnevi came under sustained fire from the separatists in Tskhinvali.
Georgian President Mikhail Saakashvili said there had been many casualties, including some deaths.
Russian role
In a televised address, he called for the spiral of bloodshed to end, but he also warned the separatists not to try the patience of the Georgian state.
Russia has close ties to the separatist administration in Tskhinvali.
Fighting has focused all day near the town of Tskhinvali in South Ossetia.
Russian and Georgian officials were expected to hold talks aimed at defusing the tensions in South Ossetia, which broke away from Georgia in the 1990s.Georgian troops protect ethnic Georgian villages in South Ossetia
A truce was announced, with emergency talks set for Friday. But the BBC's Matthew Collin in Tbilisi said Georgia then accused the separatists of opening fire again a few hours after Mr Saakashvili ordered his troops to stop shooting.
At least six people have been killed in clashes in the region in recent days.
By nightfall, both sides were trading heavy fire.
President Saakashvili has vowed to restore Tbilisi's control over South Ossetia and another breakaway region, Abkhazia.
Georgian troops protect ethnic Georgian villages in South Ossetia
Russia's special envoy to the region, Yuri Popov, has gone to the Georgian capital Tbilisi for the talks, but South Ossetia has refused to take part, saying it will only agree to a meeting at which the Russian region of North Ossetia is also represented.
Georgian officials have claimed separatists in South Ossetia - who have been trying to break away since the civil war in the 1990s - were trying to drag the country into a new conflict and blame Russia for arming them, a claim Moscow denies.
"The South Ossetian side, in connection with recent events, has voiced doubts about holding such negotiations. If this is the case, then I... will conduct shuttle negotiations," Mr Popov said.
President Saakashvili has vowed to restore Tbilisi's control over South Ossetia and another breakaway province, Abkhazia.
The Ossetians have traditionally had good relations with Russia - unlike some of their Caucasus neighbours - and North Ossetia is part of the Russian Federation.
The Ossetians have traditionally had good relations with Russia - unlike some of their Caucasus neighbours - and North Ossetia is part of the Russian Federation.
Georgian-Russian relations have been tense for months, with Georgia accusing Russia of actively supporting the separatists in South Ossetia and Abkhazia.
Russia is hostile to Georgia's ambition to join Nato and has accused Georgia of building up its forces around the breakaway regions, where Russian peacekeeping troops are deployed.
Russia is hostile to Georgia's ambition to join Nato and has accused Georgia of building up its forces around the breakaway regions, where Russian peacekeeping troops are deployed.
'Preparations for war'
/>Are you in the town of South Ossetia or elsewhere in Georgia? What is your reaction to the offer of a ceasefire? Send us your comments using the form below.
The South Ossetian news website Cominf.org said 18 people were wounded in shelling overnight by Georgian forces deployed around Tskhinvali. There was no independent confirmation of that figure.
Georgia's interior ministry said South Ossetian forces had started the latest fighting.
Russian Deputy Foreign Minister Grigory Karasin discussed the latest escalation with South Ossetian leader Eduard Kokoity and "they voiced concern about the actions of the Georgian side near Tskhinvali, which can be regarded as preparations for war," the Russian foreign ministry said.
Separately, Mr Kokoity warned that his forces would drive Georgian troops from their positions near Tskhinvali if the shelling continued.
Are you in the town of South Ossetia or elsewhere in Georgia? What is your reaction to the offer of a ceasefire? Send us your comments using the form below.
