The M23 rebel group has seized a strategic town near a provincial capital in eastern Democratic Republic of Congo, local sources said on Friday.

Candidates for a December 20 presidential poll have begun their campaign tours even as fighting rages on several fronts in the country's restive east, rocked for decades by dozens of armed groups.

The Congolese army and allied militias are battling the M23, trapping locals and displaced people in Goma, the capital of North Kivu province.

Some Western governments and the United Nations say neighbouring Rwanda is supporting the rebels, an allegation which Kigali denies.

Residents in the strategic town of Mweso, around 60 kilometres (37 miles) north of Goma, said the M23 were in control on Friday morning.

"Business has resumed in Mweso but under the control of the M23," said resident Chretien Marame.

Witnesses told AFP the army and allied militia retreated north of Mweso.

"We ended up ceding the town," said Marcellin Shenkuku, spokesman for the NDC-R militia that supports the army.

Fierce fighting had raged northwest of the town this week near the Virunga National Park.

Security and medical sources said dozens of soldiers were injured, without agreeing on a figure.

AFP journalists outside Goma's general hospital saw army vehicles collect bodies in coffins for several days in a row.

Congolese President Felix Tshisekedi, who is seeking re-election, has announced the vote cannot take place in two territories where the M23 operates, as the army's counter-offensive stagnates.

According to the United Nations, 450,000 people have been forced to flee their homes over the past six weeks, of whom 200,000 are cut off from humanitarian aid.

Almost seven million displaced people live in the DRC, mostly in the east.