Elders from the dominant clan in the Somali capital, Mogadishu, have reached an informal truce with the Ethiopian army after two days of heavy fighting.
Many civilians have been injured and wounded in the fighting
At least 20 people have died in clashes between insurgents and Ethiopia-backed government forces.
The Ethiopian army last year helped the government drive out an Islamist group, which as largely drawn from Mogadishu's Hawiye clan.
But there are reports that the ceasefire has already broken down.
The Ethiopian army last year helped the interim government drive out an Islamist group, which was largely drawn from Mogadishu's dominant Hawiye clan.
Correspondents say it is too early to determine exactly what is going on but one resident in the south of the city said he had heard a number of large explosions and machine gunfire.
A government official, who did not want to be identified, told the BBC he had heard that Ethiopian tanks had been firing on buildings occupied by Islamist insurgents.
He said he had heard reports that a truce had been signed but he had no details and agreed that the resumption of fighting in the past few hours threw doubt onto whether a truce had been effective.
Meanwhile, the Somali government has ordered the Dubai-based TV channel Al-Jazeera to close its Mogadishu base following its coverage of the fighting.
Earlier, a Hawiye clan spokesman said that the elders had agreed with Ethiopian military officials to implement a ceasefire.
African Union peacekeepers were sent to restore order
"After serious discussions on the current political situation and on the renewed violence, we agreed with the Ethiopian military officials to implement a ceasefire," AFP news agency quotes Ugas Abdi Dahir Mohamed as saying.
The BBC's Mohammed Olad Hassan in Mogadishu says at the meeting it was discussed how government troops would withdraw from Hawiye clan strongholds.
The latest fighting - described as the heaviest since the Islamists fell - started when pro-government forces tried to take control of these areas.
The bodies of government soldiers were dragged through the streets and set on fire.
Our correspondent says that although the deal is informal, it could be significant as the Hawiye clan is powerful in Mogadishu.
The transitional government is led by President Abdullahi Yusuf, who is neither a Hawiye nor from Mogadishu.
He is a Darod from the Puntland region and is accused by the Hawiye of precipitating this crisis by bringing in his own militiamen and relying on the mistrusted Ethiopians.
The withdrawal of Ethiopian troops from the country was also discussed at the meeting, our reporter says.
Ethiopian troops have been gradually handing over responsibilities to an African Union force which has been deploying to Mogadishu this month to try and bring stability to the city.
The interim government has blamed remnants of the Union of Islamic Courts (UIC) for escalating violence in the capital.
Somalia enjoyed a six-month lull in the insecurity that had dogged the country for the past 16 years when the UIC took power last year.
But insecurity has returned to the city and the UN estimates some 40,000 people have fled from Mogadishu since February.