The government is getting military help from Ethiopia
Ethiopia backs the government, which has lost control of much of Somalia to the Union of Islamic Courts (UIC).
Ethiopian fighters bombarded the UIC-held town of Beledweyne near the Ethiopian border, eyewitnesses say.
Clashes were also reported near the government-held town of Baidoa on the fifth day of renewed fighting.
The UIC has vowed to drive out Ethiopian troops which it says are fighting alongside government forces.
The Islamic group - which controls most of the south, including the capital, Mogadishu - on Saturday appealed for foreign fighters to join them a "holy war" against Ethiopia.
An UIC commander on Sunday said Ethiopian planes were bombing the Beledweyne area, about 190 miles (300 km) north of the capital Mogadishu.
A resident told AFP: "We see planes striking us and heavy fighting on the ground intensifying."
There was no immediate comment from Ethiopia.
The conflict is also reported to have spread to the Galkayo area further north.
Ethiopia has not formally acknowledged sending troops to back Somalia's transitional government, but admits sending military trainers.
The Somali government has said its own fighters - rather than Ethiopian soldiers - have been fending off an advance by the UIC.
Both sides say they have killed hundreds of people since the fighting began on Tuesday - although aid agencies report dozens of dead.
The recent clashes have heightened fears of a regional war.
The UN estimates that at least 8,000 Ethiopian troops may be in the country, while rival Eritrea is said to have deployed some 2,000 troops in support of the Islamic group.
However, Eritrean President Isaias Afewerki denied his country had troops deployed in Somalia.BBC News