(Adds army statement)

By Ali Ghamloush

NAHR AL-BARED, Lebanon, June 5 (Reuters) - Lebanese troops resumed their shelling of a Palestinian refugee camp on Tuesday, trying to force the surrender of al Qaeda-inspired militants entrenched amid thousands of civilians.

Intermittent bursts of gunfire and explosions were heard through the day at Fatah al-Islam's base in Nahr al-Bared camp in north Lebanon, a sprawling shanty town which has been pounded by army artillery in more than two weeks of fighting.

"We saw things we had never seen in life," a wounded woman evacuated from the camp said on Tuesday. "I spent five or six days without bread or water. We thought the ones who did not die from the shelling would die from hunger."

At least 114 people have been killed in the Nahr al-Bared fighting, including 46 soldiers. The army says Fatah al-Islam triggered the conflict when it attacked the army on May 20. It renewed its call for the militants to surrender.

"Army units continue to tighten the ring on armed groups inside Nahr al-Bared and were able to destroy their positions on the camp's edges, forcing them to retreat and flee towards the central neighbourhoods," an army statement said.

"These units are now defusing booby-traps and cleansing the buildings and positions that the gunmen abandoned."

A 1969 agreement prevents the army from entering Lebanon's 12 Palestinian camps, home to 400,000 refugees.

The violence is the latest jolt to stability in Lebanon. A bomb on Monday near Beirut wounded seven people. It was the fourth blast in and around the capital since the start of the Nahr al-Bared fighting. The blasts have killed one person.

WARNING

Hamas, a mainstream Palestinian faction, warned fighting could spread to other camps, as it did on Sunday and Monday when militants with a similar ideology to Fatah al-Islam's fought the army at Ain al-Hilweh camp in south Lebanon.

"We are seeking a way out of this crisis as soon as possible so that we don't all pay a heavy price," said Raafat Morra, Hamas spokesman in Lebanon.

Some Fatah al-Islam fighters had surrendered to mainstream faction Fatah, a Fatah official said. "This is one of several steps that would secure an end to this phenomenon," said Fatah official Jamal Khalil.

But a senior Fatah al-Islam commander denied any fighters had surrendered. "These are lies. This is nonsense," Abu Hurayra said by telephone.

"They are launching a classical war, we are using guerrilla warfare. God willing, (fighting) will be for months, if they want. As long as they continue, we will stay in our positions," he said. "They will not advance an inch into the camp."

Palestinian factions including Fatah and Hamas have condemned Fatah al-Islam, which shares al Qaeda's ideology of global jihad and has fighters from across the Arab world.

"We fear the repercussions from lengthy military action because there is more than one side trying to sabotage Lebanon and spread the troubles to other places," Morra told reporters.

The government says Fatah al-Islam had instructed militants from the Jund al-Sham group at Ain al-Hilweh camp to take up arms on Sunday and Monday. Two soldiers were killed. Jund al-Sham members could be seen in the streets but without weapons on Tuesday. Some of the several hundred Palestinians who fled the camp began returning home.

About 27,000 of Nahr al-Bared's 40,000 refugees have fled, many of them to the nearby Beddawi camp. UNRWA, the U.N. agency that cares for Palestinians, has launched an appeal for $12.7 million to meet the urgent needs of the displaced.

Up to 7,000 people remain in the camp, where unexploded shells litter the streets, said Virginia de la Guardia, spokeswoman for The International Committee of the Red Cross. (Additional reporting by Nadim Ladki, Tom Perry and Yara Bayoumy in Beirut)

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