By Sahra Ahmed

KISMAYU, Somalia, Feb 25 (Reuters) - At least two people died in fresh clashes between Islamist-led rebels and militias allied to the Somali government, witnesses said on Monday, in a sign of the growing threat from insurgents outside the capital.

Local chairman Ali Hussein Nur said five civilians were wounded in the clashes, which broke out late on Sunday in the small town of Doble near the Kenyan border.

"The Islamist militiamen forced their opponents out of town during yesterday's gun battle," he told Reuters by telephone, adding that Doble was quiet on Monday.

"Traditional elders have intervened and they will resolve the conflict by meeting both warring sides."

Nur said one group of fighters had sought revenge for the murder of a clansman who was killed last week when the Islamists attacked his music and video rental business.

But a resident said the battle started when Islamists fired a rocket-propelled grenade at the home of a Doble elder.

"I heard a loud bang and smoke billowed from the house," local man Abdiweli Mohamed told Reuters by phone. "We ran there but couldn't approach. The Islamists had taken control of the building and were spraying bullets at anyone who dared go near."

Another resident said a senior Doble police commander was among the wounded and was taken to Liboi in Kenya for treatment.

The elder whose house was attacked was said to have given a radio interview last week in which he accused the Islamists of "invading" the region and restricting the freedoms of locals.

Last week, Islamist fighters targeted video and music shops and ordered sellers of khat, a narcotic leaves chewed by many Somali men, to leave the town or be killed.

Hundreds of Islamist insurgents briefly seized another town in southern Somalia, Dinsoor, in an audacious attack on Sunday.

Since being chased out of the capital Mogadishu at the end of 2006 after a brief, six-month rule of the south, the Islamists have waged a bloody insurgency against the interim Somali government and its Ethiopian military backers. (Additional reporting by Daud Yussuf; Writing by Daniel Wallis; Editing by Jon Boyle)

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