Taliban fighters have advanced closer to Lashkar Gah, capital of the strategic southern province of Helmand, pushing into a farming district on the other side of the river from the town, officials said on Saturday.
Though the Western-backed government in Kabul pushed the insurgents back with the aid of U.S. airstrikes in August, it is struggling to reverse the tide of the fighting.
Capturing the city would give the Taliban their first provincial capital since the northern city of Kunduz fell briefly a year ago and would reinforce the impression that government forces are losing momentum in the war.
The insurgents, who control large sections of the opium-growing province, are now in Bolan, an agricultural zone that links Lashkar Gah with Gereshk, a town that straddles the main Highway One, as well as Marjah district center to the west.
"The Taliban came to our villages, blocked the main road and are attacking security forces," said local resident Rozi Mohammad.
Local officials said security forces were engaging the insurgents and were expected to begin offensive operations soon though they faced strong opposition.
"We are about 300 meters away from the Taliban positions. They are firing at us from residents' homes and we are waiting for fresh forces to repel them," said Hesmatullah, a policeman whose unit was involved in the fighting.
Taliban spokesman Qari Yousuf Ahmadi said government forces had taken heavy casualties.
The Taliban has tightened pressure on Helmand for much of the past year and is now estimated to control or contest most of the districts in the province, which supplies a major proportion of the world's illegal opium.
Last week, frustrated by police and army units that have left a string of checkpoints across the province without fighting, the governor of Helmand Hayatullah Hayat threatened to put troops on trial for abandoning their positions.
"Those who have escaped and come to Lashkar Gah will be tried. They will be investigated," he told a meeting of officials and tribal elders.