The attack started at dawn as militants raided the town from different directions, residents report.
Two residents in the town of Beled Hawo say the al-Shabab fighters first attacked a military base about 6 kilometers northeast of the town using a suicide car bomb followed by infantry.Sources say soldiers at the base have retreated into Kenya.
The second attack targeted a police station inside the town using same tactic, a former administration official in Beled Hawo said. A heavy gun battle was reported at the station.
Residents have seen Al-Shabab militants in the streets of Beled Hawo and sporadic gunfire can still be heard.
One resident says there was an exchange of gunfire at a border crossing linking Beled Hawo to the Kenyan town of Mandera.
The town is a key border crossing for people travelling between Somalia and Kenya.
Residents in the town say Kenyan soldiers at a military base near Mandera fired heavy artillery at al-Shabab in an attempt to keep them from crossing the border.
Residents now say al-Shabab militants left the town after Kenya military bombardment. Kenya military helicopters are also in the air.
A resident says he saw the body of one person near the police station. More casualties expected.
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