Georgian warplanes have attacked separatist forces on the outskirts of the South Ossetian capital of Tskhinvali hours as the United Nations Security Council failed to agree on a statement ending the conflict.
As part of an all-out assault on the breakaway region, Georgian forces shelled the regional capital where thousands of people took refuge in makeshift shelters.
Russia, which backs the separatists, had urged the world community to help avert massive bloodshed, but Georgia said the operation was aimed at ending the de facto independence South Ossetia won in a war in 1991-92.
The United Nations was unable to agree on a Russian-drafted statement that would have called on Georgia and separatists in its South Ossetia region to halt all bloodshed immediately.
The 15 Security Council members remained behind closed doors for two hours discussing a three-sentence statement.
But council diplomats said one phrase in it was unacceptable to the Georgians.
The wording called on all sides in the conflict "to renounce the use of force", according to a draft.
The two sides earlier agreed to observe a ceasefire and hold talks to end the conflict. In a televised address, Georgian President Mikhail Saakashvili earlier called for the bloodshed to end, but also warned the separatists not to try Tbilisi's patience.
A truce was later announced, with emergency talks set for Friday, but both sides continued to trade heavy fire.
Georgia accuses Russia of arming the South Ossetian authorities. Moscow denies the claim.