Heavy clashes erupted in the Ain el-Helweh Palestinian refugee camp in the southern port city of Sidon on Monday after an Islamist militant was killed, a Palestinian official said.

"Issam al-Beqaai was shot when a gunman stormed into his father's clothing store and opened fire," the official told reporters, adding that the victim's body was riddled with bullets.

Al-Beqaai was a member of the Islamist group Jund al-Sham. Armed clashes between Jund al-Sham and its rivals in the Fatah faction erupted after the incident, with fighters opening fire with machine-guns and rocket-propelled grenades.

The Lebanese army immediately took up position at the camp's entrance, just meters away from the fighting, as dozens of panicked families fled the camp and traffic was cut off.

The incident was a vendetta killing following a shooting 10 days ago between al-Beqaai and another man thought to be close to the secular Fatah political faction, Palestinian officials said.

Ain el-Helweh has in recent months become the scene of clashes between Fatah and Jund al-Sham, a Sunni group comprising mainly Lebanese without a clear hierarchy.

Members of extremist groups believed to have links with Al-Qaeda have settled in Lebanon's Palestinian refugee camps, especially in Ain el-Helweh which has a population of more than 45,000.

The camps are outside the control of Lebanese authorities, with Palestinian factions in charge of security.

Last summer, more than 400 people were killed in a 15-week battle in the northern Nahr al-Bared camp before the Lebanese army expelled Islamists holed up there.