Residents of a Sudanese city ran for their lives during fresh fighting and looting on Sunday, after a worker for aid group World Vision died of wounds suffered in earlier battles.

The latest violence adds to what the United Nations says is a worsening security situation in Sudan's vast western region.

"They have started looting the market," a resident of Nyala, the capital of South Darfur state, told AFP.

He reported armed men raiding shops in the commercial area, and said residents were "running in the street" for safety as explosions and shooting were heard again.

Urban battles, which state officials blamed on "differences" between members of the security forces, first broke out on Wednesday night and continued on Thursday.

A Sudanese World Vision employee "suffered head injuries in Thursday's attack and succumbed to his injuries yesterday (Saturday) noon," said one humanitarian source, asking for anonymity.

A second World Vision staff member was killed during Thursday's clashes.

Ali Al-Za'tari, chief of the United Nations in Sudan, confirmed in a statement that "two Sudanese staff members from the humanitarian non-governmental organisation, World Vision International" were killed.

"A third World Vision staff member was also critically injured," he said.

The fighting in Nyala was sparked by the killing of a notorious local bandit who was also an officer in the paramilitary Central Reserve Police.

Initial combat had left the city's best hotel damaged, according to the local resident, while humanitarian sources reported the looting of foreign aid agencies.

The World Vision office was caught up in crossfire.

A suspected rocket-propelled grenade hit the top of the World Vision building, came down "and exploded on the ground", one humanitarian source said.

Rebels in Darfur have been fighting the government for 10 years, but instability has been complicated by inter-tribal fighting, kidnappings, carjackings and other crimes, many suspected to be the work of government-linked militia and paramilitary groups.

The "shoot-out in an urban area of Darfur's most populated city" highlights the region's unstable security environment, Za'tari said.

"If humanitarian work in Darfur is forced to scale back because of the unsafe and insecure conditions for our staff and partners, then many more people in Darfur will suffer," he said.

The UN's World Food Programme (WFP) told AFP that because World Vision was one of its partners in South Darfur, and because of the security situation, there will be a disruption of food aid.

"We estimate that around a little over 400,000 people will be affected," mainly in Nyala, said WFP spokeswoman Amor Almagro.

Schoolchildren and pregnant and nursing mothers were among those receiving WFP assistance through World Vision, she said.

In February, a UN panel of experts reported "some incidents in which former members of government militias have forcibly expressed their discontent with the current government, especially against the backdrop of rising inflation and unemployment".

The United States charge d'affaires to Sudan, Joseph Stafford, later said Washington was worried "about the deteriorating security situation in Darfur and the conflict between the government forces and the militia".

The UN says an estimated 300,000 people have been forced to flee their homes because of fighting in Darfur this year, more than in the past two years combined.

There were already 1.4 million people in camps for Darfuris displaced by the decade-long conflict.