South Ossetian Information and Press Committee head Irina Gagloyeva claims 30 people -- both civilians and separatist security forces -- were wounded in Tskhinvali and nearby ethnic Ossetian villages during the shootout.
But the heaviest casualties apparently occurred on the Georgian side.
Tbilisi says three of its peacekeepers were killed and several other people wounded in the ethnic village of Tamarasheni and other nearby Georgian settlements. Tamaresheni is located several hundred meters north of Tskhinvali.
None of these figures could be independently confirmed. As in previous incidents, both sides blame each other for opening fire first.
Georgian President Mikheil Saakashvili convened an emergency meeting of his National Security Council. Addressing ministers, he described the overnight clashes as part of an alleged separatist plan to cleanse South Ossetia from all ethnic Georgians.
"Last night, armed groups attempted to seize the road that goes around Tskhinvali and leads to Georgian villages. Their intention was to take possession of these villages with a view to driving civilians out of the Didi Liakhvi Gorge," Saakashvili said.
Saakashvili, however, did not specify the evidence on which his claims were founded.
His remarks echoed earlier charged leveled by Givi Targamadze, the chairman of the Georgian parliament's Defense and Security Committee. At a news briefing on 9 August, Targamadze cited unspecified intelligence information to accuse South Ossetia of planning coordinated attacks on Georgian villages.
Georgian State Minister Giorgi Khaindrava, who is in charge of negotiating a comprehensive peace agreement with South Ossetia, told reporters in Tbilisi the overnight incident was an attempt at reviving the 1992 separatist conflict.
"It is very difficult to sort out the situation from Tbilisi. It is not in our interest to open fire, and what happened tonight is an attempt to drag us into a new conflict, an eventuality that we reject categorically," Khaindrava said. "Unfortunately, in a situation when one part of Georgia's population in under threat, we have no other alternative than to return fire."
Colonel Nikolai Baranov, a spokesman for the Russian-led peacekeeping force that monitors the 1992 cease-fire agreement, said the first shots were fired from an area close to the ethnic Ossetian village of Prisi, east of Tskhinvali.
However, he said this was not enough to state "with 100 percent certainty" that South Ossetian forces were responsible for starting the shootout.
Talking to Russian reporters in Tskhinvali, Baranov said peacekeepers succeeded in securing a brief lull during the night.
"Until six o'clock, we conducted intensive negotiations with both sides to obtain a cease-fire," Baranov said. "Both sides promised to do so and, as a result, hold their fire for some 20 minutes. But after that fighting resumed with renewed intensity."
This was the second straight day of violence in South Ossetia.
Khaindrava yesterday said three Georgians and three Ossetians had been wounded during the day in the same area, while South Ossetia accused Georgian forces of shelling the northern suburb of Tskhinvali.
Tension has been mounting in the region since Georgia in early June ordered Interior Ministry troops and police forces into South Ossetia, officially to combat smugglers operating from Russia's Republic of North Ossetia.
Tskhinvali claims the move is evidence that Georgian President Mikheil Saakashvili, who has made restoration of his country's territorial integrity a top priority, intends to forcibly restore control over South Ossetia and the other separatist republic of Abkhazia.
Tbilisi denies the accusations, saying it will seek reunification only though negotiations. It also accuses South Ossetia of recruiting armed mercenaries to fight Georgian forces.
Georgian Defense Minister Giorgi Baramidze, who was on a visit to Moscow this week with Khaindrava, said yesterday that Tbilisi was ready to pull out its forces from the conflict zone provided South Ossetia takes steps to disband its militias and other "illegal armed units."
Addressing reporters after talks with General Yurii Baluyevskii, the head of the Russian Army General Staff, Baramidze said that once a South Ossetian pledge is secured, Saakashvili will order the withdrawal of all Georgian forces with the exception of the 500 peacekeepers authorized by the 1992 cease-fire agreement.
"We agreed that, on the one hand, both sides would take every necessary step to ensure that armed units lay down their weapons and, on the other hand, that the conflict zone should be completely demilitarized and that all units that should not be there -- be it from the Georgian or South Ossetian side -- be pulled out," Baramidze said.
This marks the first time a Georgian official has publicly admitted that the recent deployment of police forces into the conflict zone constitutes a violation of the cease-fire agreement.
Speaking after Baramidze, General Baluyevskii called on the Georgian and South Ossetian sides to avert further escalation.
"It is imperative that the status quo that existed in late May be restored," Baluyevskii said. "It is imperative that steps be taken to ensure that all [armed] units withdraw from the area controlled by the joint peacekeeping forces and that the order that existed in late May, however fragile it was, be restored. [Baramidze and I] are both convinced this must be done."
Georgian Prime Minister Zurab Zhvania today reiterated earlier demands that the conflict zone be entirely demilitarized, that South Ossetia agree to enter into direct talks with Tbilisi, and that the Organization for Cooperation and Security in Europe (OSCE) deploy more observers to the region.
Following the overnight fighting, Russian First Deputy Foreign Minister Valerii Loshchinin today suggested that the Joint Control Commission on South Ossetia (JCC) hold an emergency meeting to find ways to avert further confrontation and said Moscow will dispatch a high-ranking delegation to Georgia as soon as possible.
The JCC includes representatives of Russia, Georgia, South Ossetia, and North Ossetia, which all contribute troops to the joint peacekeeping force.
Loshchinin warned that "the situation in South Ossetia is deteriorating further with each passing hour, and may soon get out of control."