Suspected jihadists on Monday attacked military barracks and ringed a northern Mozambican town, hoisting their flag a few kilometers from a major gas exploration site, police said.

The Wanbao rice farm project located in southern Mozambique's Xai-Xai district on April 4, 2018 Photo: Xinhua

The attack took place in Mocimboa da Praia, where a shadowy jihadist group first launched its offensive in October 2017.

Residents call the group Al-Shabaab but it is not linked to a group by the same name operating in battle-scarred Somalia.

"Evildoers burst into the main town of Mocimboa da Praia and began exchanging shots with the defense and security forces," national police commander Bernardino Rafael told reporters in the capital Maputo.

He said fighting was still going on and called on inhabitants to be wary of insurgents who "may want to infiltrate."

Police spokesman Orlando Mudumane said the attack was launched before sunrise and that the insurgents had "hoisted their flag" in the town. 

Another police officer in Mocimboa da Praia told AFP "the attackers surrounded virtually the entire small town and now control the air base, the port and the police stations."

The faceless group has killed more than 700 people, according to the medical charity Doctors Without Borders (MSF) - causing hundreds of thousands to flee the gas-rich region and raising concern among energy giants. While the insurgents have so far mainly targeted remote villages, Monday's attack was directed at Mocimboa's military headquarters.