Fighting broke out this month between government troops and an ethnic rebel splinter group known as the DKBA in Karen state, near the border with Thailand.
More than 4,000 people have fled the violence so far.
Video footage sent to AFP showed dozens of women and children packed into a monastery, some handing out food packages from aid groups while others rifled through piles of donated clothing.
The clashes come just weeks after Aung San Suu Kyi's government held a landmark summit aimed at ending almost seven decades of ethnic insurgencies.
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But ongoing fighting in Kachin and Shan states overshadowed the talks and ending the complex, protracted conflicts is expected to take years.
The fresh fighting further south adds to the uncertainty.
An officer from the DKBA, who asked not to be named, told AFP that four of their soldiers had been killed and five wounded in recent days.
Meanwhile, Major Naing Maung Zaw from Myanmar's Border Guard Forces (BGF), said several of their troops had been hit by landmines planted by rebels.
"Many soldiers from our side were killed and injured in the beginning because we gave time for villagers to flee from the area before we started fighting back."
Distrust of the Tatmadaw, as the army is known, runs deep among ethnic groups after decades of oppression under the former military junta.
On Friday seven Myanmar soldiers were jailed for killing villagers in Shan State, a rare punishment for abuses by the army.
The much larger KNU, which has signed a ceasefire with the government, warned the fresh fighting threatened to derail fragile peace talks in the region.
"We protest military activities by the government Tatmadaw and BGF forces... And demand stopping of the ongoing conflict," the group said in statement in English.