Armenia and Azerbaijan have been locked in a territorial dispute over the ethnic Armenian region of Nagorny Karabakh for decades, with deadly fighting flaring up earlier this year and in 2016.
The region declared its independence from Azerbaijan after a war in the early 1990s that claimed 30,000 lives but is not recognised by any country — including Armenia — and is still considered part of Azerbaijan by the international community.
Defence officials in both countries said intense clashes continued after erupting on Sunday along the frontlines of the region.
Azerbaijani President Ilham Aliyev on Monday ordered partial military mobilisation and General Mais Barkhudarov vowed to "fight to the last drop of blood in order to completely destroy the enemy and win."
The Armenian separatists announced that 15 more of their fighters had been killed and Azerbaijan increased its civilian toll from rebel shelling near Terter by one to six, bringing the total reported fatalities on both sides to 40.
With each side blaming the other for the latest fighting, world leaders have urged calm as fears rise of a full-scale conflict that could draw in regional powers Russia and Turkey.
Kremlin spokesperson Dmitry Peskov told reporters Monday that Russia was monitoring the situation closely and that the current priority was to "stop the hostilities, not to deal with who is right and who is wrong."
The Karabakh defence ministry said on Monday that 32 of its fighters had been killed in the latest clashes. Eight civilian fatalities have been reported, including an Azerbaijani family of six and a woman and child on the Armenian side.
Azerbaijan has not announced military casualties but Armenian defence ministry spokeswoman Shushan Stepanyan claimed that "dozens of corpses of Azerbaijani soldiers" lay on territory won back overnight.
She said heavy fighting continued on Monday morning along the frontline and claimed Armenian forces had won back positions taken Sunday by Azerbaijan.
But Baku claimed further advances.
Azerbaijani forces "are striking enemy positions... and have taken several strategic positions around the village of Talysh", the defence ministry said.
"The enemy is retreating," it added.
Martial law
Armenian military officials said Azerbaijani forces were continuing to attack rebel positions using heavy artillery, while Azerbaijan's defence ministry accused separatist forces of shelling civilian targets in the town of Terter.
Baku claimed to have killed 550 separatist troops, a report denied by Armenia.
The escalation has stirred an outpouring of patriotic fervour in both countries.
"We have been waiting for this day for so long. The fighting must not stop until we force Armenia to return our lands," Vidadi Alekperov, a 39-year-old waiter in Baku, told AFP.
"I'll happily go to the battlefield."
In Yerevan, 67-year-old Vardan Harutyunyan said Armenia had been anticipating the attack.
"The (Karabakh) question can only be resolved militarily. We are not afraid of a war," he said.
Fighting between Muslim Azerbaijan and majority-Christian Armenia threatened to embroil regional players Russia, which is in a military alliance with Yerevan, and Turkey, which backs Baku.
Armenia accused Turkey of meddling in the conflict and sending mercenaries to the battlefield.
France, Germany, Italy, the United States, the European Union and Russia have urged a ceasefire.
Armenia and Karabakh declared martial law and military mobilisation Sunday, while Azerbaijan imposed military rule and a curfew in large cities.
Talks to resolve the conflict — one of the worst to emerge from the 1991 collapse of the Soviet Union — have been largely stalled since a 1994 ceasefire agreement.
Analysts told AFP on Sunday international brokers needed to step up their efforts to prevent an even worse escalation.
France, Russia and the United States have mediated peace efforts as the "Minsk Group" but the last big push for a peace deal collapsed in 2010.
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