The U.N. peacekeeping mission in Ivory Coast said residents in Duekoue rushed to its area headquarters to flee violence between pro-Gbagbo forces and fighters supporting Alassane Ouattara.
Ouattara has a U.N. Security Council resolution recognizing him as the winner of a November election but Gbagbo, the incumbent, refuses to give up power.
Duekoue is a strategic area because of its proximity to the cocoa-producing areas of the country. Ivory Coast is the world's largest cocoa producer.
A Roman Catholic priest who spoke to the BBC on condition of anonymity said as many as 30,000 people are in a church compound in Duekoue seeking shelter from the conflict. Many, he said, arrived with gunshot wounds.
As many as 1 million people have fled their homes since the November election and more than 450 were killed. The International Crisis Group last week said civil war has broken out in Ivory Coast.
Paris last week drafted a U.N. resolution calling for tighter sanctions against Gbagbo and the ICG said it was time for U.N. military intervention.