Somali Islamist leaders who have retreated to the port of Kismayo say they will resist advancing Ethiopian and Somali government troops.
Somali Islamist militiamen are fighting Ethiopian and Somali government troops advancing towards their last major stronghold in the port of Kismayo.
Sheikh Sharif Ahmed said the Islamists were "ready to fight the enemy of Allah" and had only left the capital, Mogadishu "to prevent bloodshed".
Heavy artillery fire has been reported near the town of Jilib, halfway between Kismayo and the capital, Mogadishu.
Ethiopian tanks accompanied by Somali troops are said to have reached halfway between Mogadishu and Kismayo.
Ethiopian fighter jets have also been flying low over Kismayo, reports say.
The combined force took Mogadishu on Thursday, forcing the Islamists out.
The Islamist militia has vowed to resist the Ethiopian and Somali government troops who forced them out of the capital on Thursday.
Some 3,000 Islamist fighters are believed to be in Kismayo, a port town 300 km (185 miles) south-east of Mogadishu, towards the Kenyan border.
Ethiopian artillery and troops officially entered Somalia, joining fighters loyal to Somalia's interim government, to repel an Islamist assault on the government stronghold of Baidoa.
We are going to advance from different directions to try and encircle the city [of Kismayo] Somali government spokesman
Hundreds of residents are said to be fleeing the town of Jilib, roughly halfway between Baidoa and Mogadishu, amid fears of an imminent battle between the Islamists and the advancing force.
"We will fight the Ethiopians, God willing, we will remove them from our land," Ahmed Ali, an Islamist commander, told Reuters news agency from Jilib.
The BBC's Peter Biles says Jilib is a gateway to the south of the country and the Islamist militia are likely to use the town to block any further advance.
He says the Islamists could find themselves trapped between Kismayo and the Kenyan border.
Guerrilla war fears
A Somali government spokesman said its forces were aiming for the Islamist stronghold of Kismayo.
"We are going to advance from different directions to try and encircle the city," a government spokesman told the Associated Press news agency.
The spokesman urged the Islamists to retreat to prevent further bloodshed.
The head of Somalia's transitional government earlier met clan leaders to discuss how to stabilise the capital.
Somali President Abdullahi Yusuf, who has not yet entered Mogadishu, held the talks in the nearby town of Afgoye.
Some are opposed to Ethiopia's role in Somalia and thousands protested in Mogadishu as Ethiopian soldiers secured the city's port and airport.
An explosion in Mogadishu that reportedly killed one person has raised fears that the Islamists might begin a guerrilla war against the Somali and Ethiopian government troops.
The cause of the blast is not clear, with reports divided on whether it was caused by a hand grenade or a missile.
Food shortages
Somalia's interim government has called for talks with the Islamists.
However, the Islamists say they will not enter any dialogue unless Ethiopian forces vacate the country.
Ethiopia accuses the Islamist militia of harbouring terrorists.
The militia has its origins in a union of Islamic courts, known as the UIC, that was established to restore order in Mogadishu.
The UIC assumed control of the capital in June, driving warlords out and rapidly extending its influence to much of southern Somalia.
Some analysts say the UIC's popularity stemmed from its ability to transcend the clan enmities that have bedevilled Somalia since the overthrow of former President Mohamed Siad Barre in 1991.
Almost all Somalis are Muslim, and after years of lawlessness many were happy to have some kind of law and order under the UIC.
Much of Somalia faces food shortages because of recent heavy floods.
The UN estimates that about 30,000 people have been displaced during the fighting, and casualties have been high.
