At least 130 people were killed, including 10 soldiers, in the deadliest clashes in months between troops and rebels in the restive eastern region.
The heavy fighting between the Congo army and M23 rebels resumed on Monday morning after starting on Sunday following the arrival of the armed men in women's clothes.
"They were wearing kikwembe'' - a Congolese shawl worn by women - "over their uniforms, and women's headscarves,'' said Bifumbu Ruhira, a farmer at the village of Kanyarucinya on the front line between the Congolese army and the M23 rebels, who started fighting the government last year.
Ruhira told the Associated Press he saw the oddly dressed combatants get off two trucks on the Rwandan side and run across the border. "They were wearing kikwembe to confuse us, to conceal the fact they were soldiers,'' he said.
"The whole village was afraid and I said to my wife, 'Get to Goma,''' he said, naming the nearby provincial capital which he thought she would be safe from the fighting.
Fierce fighting broke out on Sunday outside Goma between the Congolese army and the M23 rebels, an armed group launched by Tutsi former soldiers who mutinied in April 2012.
Loud blasts rang out north of the city on Monday afternoon, and hundreds of people were seen fleeing towards Goma in a cloud of dust, an AFP photographer reported.
"Our forces have inflicted very heavy losses on the M23 fighters, 120 have been killed and 12 captured,'' government spokesman Lambert Mende said.
Mende said that 10 soldiers had also died in the ongoing clashes in the volatile east, an area rich in minerals including gold and coltan, which is used in cell phones and other electronic equipment.
He said that the M23 rebels, who briefly seized Goma late last year before withdrawing under international pressure, attacked army positions "with the support of Rwandan troops.''
"For several weeks the M23 rebels and their Rwandan allies have been reinforcing their positions,'' Mende said.
Both Rwanda and Uganda have been accused of supporting the M23, and US President Barack Obama early this month urged the DRC's neighbours "to stop supporting armed groups''.
Both countries have denied the charges.
"The toll from these skirmishes is not yet definitive but until now the army forces have responded with bravery and efficiency to this attack,'' Mende said.
UN soldiers did not intervene, Mende stressed.
Army forces also managed to recapture previously rebel-held positions as they fled, the spokesman said.
Some 2,000 soldiers were reportedly deployed during the fighting but Mende declined to confirm this figure.
The fighting outside Goma comes as a separate rebel attack in the town of Kamango in the northernmost part of North Kivu province sent 55,000 people fleeing to neighbouring Uganda, according to the Red Cross.
Kamango was attacked and briefly occupied on Thursday by a Ugandan-led rebel group, the Allied Democratic Forces (ADF).
The ADF was formed in the mid-1990s in the Rwenzori mountains in western Uganda, close to the DR Congo border. It has been relatively quiet in recent years, but attacks have increased in recent weeks, according to a Western military source.
A heavily armed brigade of some 3000 UN troops with more power to fight renegade forces than ever before began arriving in the region in May.
The troops, drawn in equal numbers from Malawi, South Africa and Tanzania, are joining about 17,000 UN soldiers already deployed in the area with a limited mandate to protect civilians and themselves only.
In all, about 30 armed groups are active in the region, where they have lucrative stakes in the illegal mining of diamonds, gold and coltan. These minerals are then exported around the world via neighbouring Burundi, Rwanda and Uganda.
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