Daily arms shipments are arriving in Somalia in violation of a United Nations arms embargo, a senior UN official has told the BBC.
Islamic militants currently control the Somali capital
Bruno Schiemsky, co-ordinator of the UN Monitoring Group, said the flow of arms had risen substantially since Islamists went on the offensive this month.
He warned it was only a matter of time before the Union of Islamic Courts clashed with interim government forces.
The African Union has urged the world to renew support for the government.
Meanwhile the UN refugee agency has warned that unless a peaceful solution could be found, Somalia's humanitarian problems would "increase tremendously", AFP news agency reported.
And a UK government minister, Lord Triesman - speaking on behalf of the International Contact Group on Somalia - called on the transitional government and Islamic militias to begin a dialogue to try to bring order to the country.
The interim government is under growing pressure from the Islamist militia who now control the capital, Mogadishu, and have extended their authority through much of central and southern Somalia.
Somalia is struggling to emerge from 15 years of anarchy and violence which have seen it with no functioning government since the overthrow of Siad Barre in 1991.
Mr Schiemsky describes a growing build-up of arms inside Somalia with deliveries coming in by air and by sea on a daily basis.
The Union of Islamic Courts is reported to be beginning to threaten President Abdullahi Yusuf's own base in the semi-autonomous northern region of Puntland.
The president and the transitional government are based in Baidoa, north-west of Mogadishu.
On Saturday, the Islamists complained that Ethiopian troops had crossed into Somalia - a claim denied by Addis Ababa.
Ethiopia has supported the transitional president, and is determined not to see an Islamic state founded in Somalia.
Independent sources are now also saying that about 500 Ethiopian troops are indeed inside Somalia - just east of Baidoa.
With both sides re-arming, and credible reports of foreign troops inside the country, the situation in Somalia looks increasingly grim, the BBC's Martin Plaut says.
Warning of the risk of a worsening humanitarian crisis, the UN High Commissioner for Refugees, Antonio Guterres, told a news conference in the Kenyan capital:
"What we appeal to the international community, both in Somalia as in everywhere else, is to do its best to create conditions for a peaceful settlement of the problems and an adequate political solution."
In a statement from its headquarters in Ethiopia, the African Union (AU) condemned the violence destabilising Somalia, and called for the early deployment of peacekeeping forces in the country.
The military advance of the Islamist militia has threatened to undermine the minimal achievements of the transitional government, established 18 months ago.
The AU said the international community should not let up in its support for what it described as the legitimate authority in Somalia.
However, the Union of Islamic Courts, which denies US claims that it is linked to al-Qaeda militants, has said it has no intention of trying to take over from the transitional administration and is prepared to engage in talks, given the right conditions.