New Zealanders are being advised against all travel to East Timor and those already in the country told to consider leaving.
Fresh gunbattles have been raging in parts of the capital, Dili, and New Zealand troops are on stand-by to evacuate New Zealanders living there.
New Zealand's ambassador to Dili has described a scene of chaos and fear with reports of intense gunbattles between pro-government soldiers and rebel troops.
Ethnic clashes began in East Timor on Saturday night after celebrations marking the anniversary of the former Portuguese colony's independence from Indonesia.
One soldier has been killed and six injured.
The Ministry of Foreign Affairs said fighting was continuing and could spread to other areas.
Its advisory urged New Zealanders already in East Timor to avoid all travel outside Dili and to inform the New Zealand embassy if leaving the country.
Ambassador Ruth Nuttall has been helping with water and sanitation at a compound in the suburb of Comoro, which is full with refugees.
She said she thought there were around 40 New Zealanders in Dili.
Five people died last month when a protest by former soldiers in the city turned into a riot.
The trouble was sparked by the dismissal of nearly 600 troops who had gone on strike, complaining of discrimination and poor working conditions.
Thousands of people fled after the riots.
- NZPA, NEWSTALK ZB, HERALD ONLINE STAFF
New Zealanders warned against East Timor travel
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