At least 300 people were killed in clashes between Sudan's army and former rebels in the south earlier this week, aid workers say.
Most of those killed are soldiers but the fighting took place in the river port town of Malakal so correspondents say many civilians may also have died.
A BBC correspondent in Sudan says the clashes are the most serious breach of a 2005 deal to end two decades of war.
Under that deal, the former rebels joined a power-sharing government.
What started as a clash between a northern militia led by Maj Gen Gabriel Tang and the Sudan People's Liberation Army (SPLA) former rebels escalated when the militia took shelter in a Sudanese army garrison.
The garrison was besieged and then the SPLA stormed the base.
Malakal is a busy port town on the banks of the Nile
The next day the Sudanese army returned and following tank battles and the shelling of parts of Malakal town, retook their camp.
Though the situation is now reported to be calm, parts of Malakal are still too tense to access, so no-one is putting an exact figure on the number of casualties.
High-level delegations from the capital, Khartoum, and the southern capital, Juba, as well as UN peacekeepers have been sent to defuse the situation and a ceasefire has now been agreed, with all forces returning to their original positions.
After fighting each other for more than 20 years, both the mainly Christian and animist SPLA and the Muslim, Arab north say they are keen to prevent any slide towards further conflict.
United Nations Secretary-General Kofi Annan said he was "deeply concerned" over clashes that flared in the southern town of Malakal on Monday and Tuesday.
Non-essential UN and aid agency staff have been leaving Malakal.
In a statement, Mr Annan appealed to Sudan's national unity government and that of southern Sudan "to make all possible efforts to contain the situation".
The UN peacekeepers in the town moved to defend their staff and offices.
A spokeswoman said they had no mandate to intervene and that the UN was encouraging both sides to peacefully resolve the situation.
There are 10,000 UN peacekeepers deployed in southern Sudan at a cost of $1bn a year.
Under the terms of the peace deal, some army units are supposed to merge and these clashes were between troops who are officially part of the same force.
The BBC's Jonah Fisher in Khartoum says there has been a long dispute between Gen Tang's militia and the SPLA over control of an area near Malakal, located on the banks of the Nile near Sudan's oilfields.
He says it has been one of the tensest towns in the south.
The peace deal has held - until now
During 20 years of civil war, Khartoum armed numerous ethnic militias in the area to enable it to begin extracting oil.
Unlike the continuing conflict in the western region of Darfur, Sudan's north-south ceasefire has largely held but few militiamen have handed in their weapons.
Under the peace deal, the SPLA joined a unity government and SPLA leader Salva Kiir is national vice-president.
Last month, however, south Sudan's Vice-President Riek Machar told the BBC that some aspects of the deal had not been implemented, such as sharing oil revenue and civil service jobs.
At the time BBC Africa analyst Martin Plaut said anger was growing in the south at their perceived marginalisation.