Loud explosions were heard in the northern town, capital of Unity state and one of the hardest fought over regions in the 14-month long war, and where 53,000 civilians are sheltering inside a United Nations camp.
"The rebels are shelling our positions in Bentiu," Defence Minister Kuol Manyang told AFP. "This is a violation of the cessation of hostilities agreement, and we will act in self defence."
Fighting broke out in South Sudan, the world's youngest nation, in December 2013 when President Kiir accused his sacked deputy Riek Machar of attempting a coup.
The fighting in the capital Juba set off a cycle of retaliatory massacres across the country. Both government forces loyal to Kiir and rebels loyal to Machar continue to fight, despite numerous ceasefire deals.
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The UN estimates that 2.5 million people are in a state of emergency or crisis, steps just short of famine.
The latest fighting comes a day after donors pledged USD 529 million towards a USD 1.8 billion aid appeal by the UN, with over 2.5 million people on the brink of famine.
Top US official Anne C Richard said that no conflict around the world today filled Washington with as "much frustration and despair" as South Sudan.
Richard, US Assistant Secretary of State for Refugees, said some areas were "teetering on the brink of famine", and that people "continue to suffer and die unnecessarily because their leaders are unwilling to do what it takes to restore peace."
Kiir and rebel leader Riek Machar have been set a March 5 deadline to strike a final peace agreement, but previous deadlines have been repeatedly ignored despite the threat of sanctions.
Washington, a key backer of South Sudan's independence in 2011, warned the leaders today they "bear full responsibility for this man-made crisis" and must make "the needed compromises to reach a final agreement."
Almost two million have been forced from their homes and 500,000 of them have fled abroad to neighbouring countries.