Rebels in Ivory Coast have seized a strategically important town in the fiercest fighting since the 2002-03 civil war, causing panic among tens of thousands of refugees.

The New Forces movement now holds a 30-mile corrider along the western border, which they say is vital in cutting off incumbent president Laurent Gbagbo's ability to recruit mercenaries from neighbouring Liberia.

As the conflict threatens to escalate, the Guardian has learned that Gbagbo's rival, Alassane Ouattara, is set to leave his base in Abidjan for the first time since becoming a virtual prisoner there when the crisis began three months ago.

A spokesman said Ouattara, who has until now been boxed in by Gbagbo's forces at the Golf hotel, will travel to the Ethiopian capital, Addis Ababa, for peace talks with an African Union panel on Thursday. Gbagbo has been invited but it is unclear whether he will attend.

Ouattara initially distanced himself from the northern-based New Forces, who had attempted to topple Gbagbo in 2002-03. He argued he did not want to be seen as having taken the country by force when he had won the election fairly according to Ivory Coast's electoral body, the UN and the international community.

But in recent weeks his administration has acknowledged the role of the rebels, who are also making inroads in the commercial capital of Abidjan. A section of the city called PK-18 is fully under Ouattara's control and checkpoints there are being manned by young men who openly acknowledge being members of the New Forces.

The seizure of Toulepleu on Sunday extends the gains by the rebel army, which earlier had seized another town, Zouan-Hounien. Ouattara's defence spokesman, Leon Kouakou Alla, a former captain in Gbagbo's paramilitary police unit, said Toulepleu was strategically important because it was the base from which Liberian mercenaries were being recruited to fight for Gbagbo.

It was considered difficult to take the town because its garrisonhad firepower in the form of a Katyusha multiple rocket launcher. "After yesterday's combat the republican forces loyal to the president of the republic [Ouattara] took the town," Alla told the Associated Press. "The recruitment of mercenaries used to be carried out from Toulepleu. The importance of this is that now we have occupied this place, we have cut off Gbagbo's rear base."

Yao Yao, operations chief of Gbagbo's Front for the Liberation of the Great West (FLGO), acknowledged a defeat. He told Reuters: "The rebels took Toulepleu after combat that lasted the whole day. There were not enough of us to contain them this time as we were hugely outnumbered. But the FLGO was preparing a counter-attack, he said.

Analysts fear a renewed civil war could spill into neighbouring countries. During Liberia's civil war Gbagbo backed a rebel group against warlord Charles Taylor and there are persistent reports that Gbagbo has brought Liberian mercenaries to the capital.

One ex-Liberian combatant from Taylor's disbanded army told AP that he was a "field commander" in Ivory Coast for Ouattara's forces.

"What we are doing here is no secret," said the man, who spoke on condition of anonymity for fear of reprisals. "They all want to see Gbagbo give out power to the man elected."

Gbagbo, 65, has indicated he will cling to power whatever it takes. Nearly 400 people have been killed so far, most of them civilians who voted for Ouattara. Untold dozens have been "disappeared" by Gbagbo's death squads, human rights groups say.

Last week the army opened fire on a women's march calling for Gbagbo to step down. A gruesome video of the killings has been posted on the web. "We were appalled last week when we saw the video," said Johnnie Carson, the top US diplomat in Africa.

"Te leader who was thrown out at the ballot box is using political thugs and thuggery to maintain his continued domination. What we are trying to do through political and diplomatic pressure and economic sanctions is prevent a civil war."

Oxfam in Liberia has warned that the surge of refugees into Liberia has the makings of a humanitarian disaster unless the international community steps in. "This could become Africa's latest forgotten crisis," said Chals Wontewe.

"Thousands of civilians are fleeing for their lives yet the international community is failing to respond adequately. The world risks being seriously unprepared for the escalating crisis in west Africa.

"For more than three months now the people of Ivory Coast have been living with the threat of violence, intimidation, economic collapse and sexual assault. The situation is now deteriorating rapidly and urgent action is needed to avert a humanitarian crisis."