The violence in what was the cradle of Libya's 2011 revolution comes weeks after the government acknowledged for the first time the existence of "terrorist groups" in the country and said it was mobilising against them.
Authorities have been avoiding a full-blown confrontation with the heavily armed ex-rebels who have bastions in Benghazi and other eastern regions, until they can bolster the army and police.
The clashes erupted after a group led by Khalifa Haftar, a retired general who led ground forces in the 2011 uprising that toppled dictator Moamer Kadhafi, pounded a barracks of the "February 17 Brigade", witnesses said.
The two groups also fought pitched battles in Sidi Fradj, south of Benghazi and witnesses said Haftar's men seized the headquarters of Rafallah al-Sahati militia.
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Medical sources at Al-Marj hospital, east of the city, where Haftar's casualties were taken, said four bodies and 70 wounded were brought in.
Benghazi hospitals gave a toll of 16 dead and 49 wounded, without identifying them.
And Al-Abyar hospital south of the restive city said it took in four bodies and 27 wounded.
Haftar heads a group calling itself the "National Army" which launched "a large-scale operation to flush terrorists out of Benghazi", said a spokesman, Mohammed al-Hijazi.
Libya's armed forces chief of staff, Abdessalam Jadallah al-Salihin, denied any army involvement in the Benghazi clashes.
"The (regular) army has nothing to do with the clashes. The army did not give any orders for any sort of operation" in Benghazi, he said.
Salihin admitted, nevertheless, that some officers and units from the regular army had joined Haftar's group.
Prime Minister Abdullah al-Thani denounced Haftar's forces as "outlaws" and told a news conference in Tripoli that the army was "in control on the ground", urging restraint in Benghazi.