The Britain-based Syrian Observatory for Human Rights said the raid on Hamouriyeh killed 20 and other people were feared buried under debris. Another activist group, the Local Coordination Committees, put the death toll higher, saying up to 35 were killed and dozens more were wounded.
Damascus has largely been spared the violence that has left other cities in ruins, but in recent weeks, rebels who established footholds in the Damascus suburbs have clashed with government forces, moving from the east and south into the center of the capital.
The United Nations says at least 70,000 people have been killed since the conflict began nearly two years ago as an uprising against Assad's rule. The revolt turned into a civil war increasingly marked by sectarian overtones with mostly Sunni Muslim opposition forces fighting to topple the regime dominated by Alawites, an offshoot Shiite group.
Amateur videos posted online showed several vehicles on fire as thick black smoke billowed from a street. The videos show the bodies of two people, who were burned, in a pickup truck and a third person lying on the ground.
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The mortar attack was the second in as many days in Damascus. Yesterday, two mortars exploded near one of Assad's palaces, but no one was hurt.
The SANA state news agency said the mortars landed in a complex housing Tishrin Stadium and a hotel in the Baramkeh neighbourhood, killing a player from al-Wathbah club based in Homs. He was wounded inside the hotel as players were getting ready for practice and died later at a hospital.
State TV broadcast video of what it said was the hotel. The explosion blew out the windows on the first floor of the building, while shattered glass covered three beds in a one of the rooms. A bloodied duffle bag lay on the floor.
Today, Russia and the Arab League offered to broker talks between Assad's regime and the Cairo-based opposition group dominated by the Muslim Brotherhood movement. Russian Foreign Minister Sergey Lavrov said Moscow and the Arab League were trying to establish direct contact between the two sides, saying that only a negotiated settlement will end the fighting.