Rebels in Congo on Saturday called for negotiations with the government in Kinshasa to end violence in the east of the country, a day after seizing a minerals transit town near the border with Uganda, a senior rebel commander said.

The so-called M23 movement, which seized the border town of Bunagana on Friday in fighting that has forced thousands to flee their homes, said it would not advance on other urban areas if talks went ahead.

The new fighting in minerals-rich North Kivu province has dampened hopes of revival which began in the region after a short lull in fighting after two decades of instability.

It risks dragging the vast, loosely governed central African state back into war and damaging fragile relations with Rwanda, which has repeatedly denied allegations that the rebels are receiving cross-border support.

"Our aim is not to go to even Rutshuru, not even Goma. We want to remain here and call the government to come here and we negotiate," Col. Vianney Kazarama, M23's political commissar, told Reuters in Bunagana.

He was referring to larger towns in North Kivu province, which has been swept up in violence since last March after hundreds of ex-rebels defected from the army in support of a renegade general, Bosco Ntaganda, who is wanted by the International Criminal Court for suspected war crimes.

"When we defected from the national army, we told the government lets keep negotiating and we keep the peace that is existing. But the government instead said it is very powerful ... they said they will defeat us," Kazarama said.

Kazarama did not set out demands but said their faction's integration into the national army had failed because they were treated unfairly. He also said the government had failed to repatriate refugees living in Uganda and Rwanda.

The Kinshasa government was not available to comment.

The timing of the talks offer a day after capturing territory from the government suggested the dissident troops may have been seeking to strengthen their hand in any negotiations.

The U.N. Security Council on Friday condemned attacks by the rebels on peacekeepers in the area after an Indian soldier was killed.

Rwanda has denied allegations in a report by U.N. experts that provided the strongest evidence yet that officials of President Paul Kagame's government were providing military and logistical support to armed groups in Congo.

Despite outnumbering the rebels 10 to one, Congo's national army known as the FARDC, has been unable to dislodge them from hilltop hideouts.

About 600 Congolese soldiers fled across the frontier into neighbouring Uganda on Friday, while the United Nations refugee agency, UNHCR, said it had registered 5,000 refugees crossing the border since Thursday.

In Bunagana, less than a kilometre from the border, military clothing and helmets lay scattered in muddy tracks. The rebels showed off artillery canon and anti-aircraft guns that had been abandoned by the fleeing Congolese troops

Inside Uganda, Congolese troops rested in the grounds of a military barracks. In a nearby clinic, medics treated more than two dozen soldiers, some of whom had suffered gunshot wounds.

A Congolese officer denied his men had been over-powered.

"In (the) military there are lots of tactics and withdrawal is one of the tactics, so we withdrew," Mumbere Kanzau, a deputy battalion commander, told reporters near the border post.

When asked why the troops had dropped their weapons, he said: "You find yourself across the border in a country with its own laws, you have no option but to lay down your gun and follow the rules of the foreign land."