ARMED vigilantes have seized a drug cartel bastion in western Mexico, sparking a shootout between the two groups.

There were no immediate reports of casualties following Sunday's gunfight in Nueva Italia between the self-defence forces and the Knights Templar gang in Michoacan state, a senior state government official said on condition of anonymity.

On its Facebook page, the Tepalcatepec vigilante force said about 100 pick-up trucks entered Nueva Italia and a "light confrontation took place at the entrance, everything is fine".

The growing civilian militia movement, which emerged in Michoacan nearly a year ago, has seized more communities in recent weeks in their bid to oust the Templars from the state.

The militias have now surrounded Apatzingan, a city of 123,000 people considered the key stronghold of the Knights Templar in Michoacan's lime- and avocado-growing region known as Tierra Caliente, or Hot Country.

Interior Minister Miguel Osorio Chong has said the self-defence units are illegal. Yet some critics charge the government is protecting them.

Troops stood by and watched but did not act as the vigilantes moved into Nueva Italia, the Reforma newspaper reported.

Vigilante leaders have said Apatzingan is a key target because it is a Templar bastion and a vital economic hub for their produce.

But the Tierra Caliente area is also a key growing area for marijuana and synthetic drugs, which are shipped north to the lucrative market in the United States.

A fire was sparked in the city's municipal office on Friday in an apparent arson attack.

Opponents of the vigilantes have burned trucks and buses in the past week to protest the militias' incursions in the region.

The Templars have accused the vigilantes of being a proxy force for the rival Jalisco New Generation drug cartel, a charge the militias deny.

Michoacan, where more than half the population is living in poverty, has emerged as one of President Enrique Pena Nieto's biggest security nightmares. He inherited a war on organised crime and drug traffickers that has left 77,000 people dead in the past seven years.

Originally published as Mexican vigilantes seize cartel bastion