Fighting Friday is the latest in a week of violence that has killed 64 people, the BBC reported Saturday.
The conflict appears to have led to the destruction of the coastal village of Kyaukpyu populated by Muslim Rohingyas, in Rakhine state, Human Rights Watch said.
The U.S.-based humanitarian group said more than 800 buildings and houseboats in the town were burned to the ground.
The group's analysis was based on comparing satellite images of the town taken on Oct. 9 and again on Thursday.
The number of casualties from the destruction is unknown, but many of the inhabitants are thought to have fled by sea.
What triggered the latest clashes is unknown.
Burmese officials consider Rohingya to be illegal immigrants. They are denied citizenship although many of them have lived in the country formally known as Burma for generations.
More than 2,000 homes have been destroyed in seven days of sporadic fighting, said Win Myaing, a local government official, The New York Times reported.
At least 70,000 people remain in camps set up after violence in June resulted in the deaths of about 50 people.
President Thein Sein has set up a commission to examine the causes of that violence and has signed cease-fire agreements with several insurgent groups.