M23 rebels and militias loyal to the government have battled across the area recently, breaking a precarious truce that has lasted for months.
"We have taken refuge in the parish, the M23 rebels are in Kitshanga since yesterday," one resident said Sunday.
A number of wounded have been taken to hospital, according to a health worker. "This morning, there weren't any more fighters, but we are still afraid to go out," the source added on the condition of anonymity.
"The rebels are in Kitshanga and we are trying to find a way to retake the town," a security source told AFP, also on condition of anonymity.
"The war is not going to end, it will continue," said the spokesperson of one armed group that describes itself as "patriots" fighting the rebels.
According to the security source, fighting was underway Sunday in the neighbouring territory of Rutshuru.
Kitshanga, located at a crossroads in the Masisi region, about 80 kilometres (miles) northwest of the provincial capital Goma, has changed hands between powers several times since the beginning of the year, with fighting resuming three weeks ago after a precarious six-month truce.
The Rwanda-backed, Tutsi-led M23 seized the town in January, continuing its conquest of vast swathes of territory.
At the beginning of October, Kitshanga passed from the hands of an international force deployed by the East African Community, which patrolled a buffer zone between the armed groups, to the local militia and for 24 hours to the M23, before retreating.
On October 14, the army, which claims to be observing a ceasefire ordered by a regional mediator, had organised a press trip to the town a week before the town fell back into rebel control.