The displaced, including children, sought refuge in Buddhist monasteries and Christian churches, said Gam Aung, a resident in Lone Khin, a town within earshot of the gunbattles in the northern state.
"Everyone is terrified," said Tin Soe, an opposition member who lives in the area.
Heavily armed soldiers have so far blocked efforts to ferry them to safety, said Dawng Hka, a spokesman for the ethnic insurgents.
Myanmar, also known as Burma, was under dictatorship until 2011, and President Thein Sein's nominally civilian government has spearheaded the country's bumpy transition toward democratic rule. With many of his early reforms now stalled or sliding backward, he is trying to end decades-long civil wars in resource-rich border regions before his term ends later this year.
His administration has already agreed to tentative truce agreement with 14 insurgent factions, but Kachin rebels continued to hold out, demanding rights to self-determination before signing on.
The latest round of violence broke out Thursday after members of the Kachin Independence Army (KIA) briefly took hostage a state transport minister who was traveling through the region in a convoy, the government-backed Global New Light of Myanmar newspaper reported. He has since been released, but three police accompanying him remained in rebel hands.
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