"Some neighbourhoods in southern Banias are being bombarded by regular troops and soldiers," said the Syrian Observatory for Human Rights.
Some of the areas of Banias that were stuck included Ras al-Nabaa and Ras al-Rifaa, the Observatory said, adding it was the first time the army had shelled the northwestern city.
Rami Abdel Rahman, director of the Britain-based watchdog, said troops were raiding homes and making arrests "triggering panic" among residents.
"I fear that there could be a massacre like the one that happened yesterday in Bayda," a Sunni village south of Banias, Abdel Rahman told AFP.
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Abdel Rahman told AFP on Thursday, citing villagers who fled Bayda, that "at least 50 people were killed in summary executions and shelling" in the village.
He said regular troops were backed by shabiha, or the pro-government militiamen.
Along with Daraa, cradle of the uprising against Assad's regime in the south, Banias saw some of the first anti-regime demonstrations in March 2011.
Banias, a port city on the Mediterranean in the province of Tartus, has a population of about 40,000, half of whom are Sunnis, 45 per cent Alawites and the rest Christians and Ismailis, another Shiite branch, according to experts.
The region's three main coastal cities of Banias, Latakia and Tartus and their surrounding areas form the "Alawite heartland," where analysts say Assad could seek refuge if his regime falls.