"The first ground clashes have just taken place at Am-Deressa, 10 kilometres (six miles) south of Am-Dam," Communications Minister Mahamat Hissene said.
"The government forces gained the upper hand and mopping up operations are continuing."
He gave no casualty figures.
"There was violent fighting with the troops of (President Idriss) Deby, from 5:00 am (0400 GMT," rebel alliance spokesman Adberaman Koulamallah confirmed to AFP. "It was very violent. The fighting lasted for hours."
Koulamallah also claimed success, saying that the battle "turned in our favour. Government forces are completely routed. We occupy Am-Dam. The objective is still (the capital) Ndjamena."
Am-Dam is 110 kilometres north of Goz Beida and more than 100 kilometres south of Abeche, the two towns used as bases by most relief agencies working in east Chad to help 450,000 refugees and displaced people.
The UN refugee agency on Thursday said it has pulled all but two of 20 staff out of camps for 60,000 people because of instability caused by the insurgency since the rebels crossed into Chad from west Sudan on Monday.
The decision echoes one Wednesday by the UN World Food Programme in the same region, because three rebel forces were advancing across Chad from the eastern border, stating that their sights were set on the capital Ndjamena.
"All the other humanitarian agencies are going to do the same" because the situation is "too volatile and too unstable," Serge Male, representing the High Commissioner for Refugees in Chad, but he stressed that "we hope this won't last."
The UNHCR has meanwhile provided for "very short term" measures to keep about 20,000 Sudanese refugees at Koukou Angarana and about 40,000 Chadians displaced by previous internal conflicts, Male said.
The Chadian government has accused Sudan of backing the rebel assault that started on Monday, while the ink was scarcely dry on a peace pact between the fractious neighbours brokered in Doha by Qatar and Libya.
Rebels of the Union of Forces for Resistance (UFR) claimed in a statement that they captured government military vehicles during a brief land clash on Tuesday between Tizzi and Haraz Mangueigne.
Koulamallah claimed Thursday that the rebels had "more than a thousand vehicles," but said they had been attacked each day from the air by helicopters and bombers flying very high. "Our air defence works fine," he added. "That is not a problem."
The government has so far stated that it carried out one air attack on the rebels advancing across the hot, arid south of the central African country in four-by-four vehicles.
Diplomatic sources said that on Wednesday the rebels entered Am-Dam and Am-Timan, 180 kilometres south of Goz Beida, where they encountered no resistance.
However, the military activity, which follows a thwarted rebel bid last year to seize Ndjamena after they entered the capital, has led to mounting fears for some 450,000 refugees and displaced people in camps in eastern Chad.
UN chief Ban Ki-moon "is following developments in eastern Chad with increasing concern," the UN said in a statement late Wednesday, calling on Chad and Sudan to resume peace talks and urging respect for UN humanitarian operations.
Chadian Interior and Public Security Minister Ahmat Mahamat Bashir accused Sudanese President Omar El-Beshir of ordering "mercenaries" to attack Chad and vowed that the rebels would be wiped out.
Peace between Chad and Sudan is regarded as essential to any lasting settlement to a six-year-old uprising in Sudan's western Darfur region, where the Chadian rebels have rear bases.
In February last year, rebels battled their way to Ndjamena in western Chad in a bid to overthrow President Idiss Deby Itno before being beaten back with logistical help from some French forces.
Pray for peace in Chad.
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