The Lebanese army pounded a Palestinian refugee camp with artillery fire on Thursday, but the military denied reports that the action was part of a final assault on the Al Qaeda-inspired Islamic militants barricaded inside.

The firing began just before dawn and hours after more than 150 civilians fled on foot from the camp in northern Lebanon, as soldiers ringing the neighborhood moved up tanks and armored vehicles.

The army said two soldiers were killed Thursday, bringing the number of military dead to 88 since fighting began at the Nahr el-Bared camp on May 20. Earlier an armored personnel carrier was seen ferrying at least two wounded soldiers out of the camp.

Between five and 10 shells were slamming into the camp every minute. Thick black smoke billowed from deep inside the seaside camp and covered a large area above it. Heavy machine gun fire could be heard.

In a statement denying reports that it had announced a final assault, the army said that "the ongoing military operations are still in the context of tightening the noose on the gunmen to force them to surrender."

The violence came on the anniversary of the start of Israel's war with Hezbollah guerrillas in southern Lebanon last summer. In an address to mark the occasion, Prime Minister Fuad Saniora late Wednesday called for "putting a final end" to the standoff at Nahr el-Bared.

The army build up came after a sniper inside Nahr el-Bared killed a soldier overnight and following repeated refusals by the Al Qaeda-inspired group Fatah Islam to surrender.

Lebanese officials claimed victory June 21 after soldiers seized Fatah Islam positions on the camp's edges, but the militants retreated deeper into the warren of narrow lanes of densely packed buildings and continued to engage in daily fire fights.

At least 60 militants and more than 20 civilians have been reported killed in the fighting, the country's worst internal violence since the 1975-90 civil war. The camp housed more than 30,000 Palestinian refugees before the battles began.

Most of the camp's residents have already fled, but a few thousand are thought to have stayed in their homes. Those fleeing Wednesday were mostly men, accompanied by some women and a few children.

The daily An-Nahar, which is close to the government, said the army may not storm the camp outright but seize some strategic positions gradually and over time.

The Fatah Islam fighters have refused to surrender.

Samar Kadi, an International Red Cross official, said more than 150 Palestinians fled and witnesses said those suspected of ties with Fatah Islam were taken for questioning by the army.

Among those fleeing were fighters of the Palestinian Fatah movement and other factions who stayed in the camp to defend positions against attack by Fatah Islam. They were reportedly urged to leave by their leaders in Beirut in anticipation of an army assault.