Islamic State militants have seized control of large parts of a refugee camp in Damascus, where 18,000 Palestinians are living, reports say.

The London-based Syrian Observatory for Human Rights [SOHR] has reported that clashes between ISIS and members of members of Palestinian faction Aknaf Beit al-Maqdis are taking place within the Yarmouk camp. It confirmed that a "large part" is now under IS control.

An official working for the Palestine Liberation Organistion, based in Damascas, also told AFP that an assault was launched by ISIS on Wednesday morning, and jihadists took over "the majority of the camp".

Once home to around 150,000 refugees, Yarmouk has been caught between government forces and Syrian insurgent groups including Islamic State's rivals such as al Qaeda's Nusra Front since 2012.

"They pushed from the Hajar Aswad area and Nusra fighters have joined them, they have pledged loyalty to Daesh," one witness said today, using an Arabic term for Islamic State.

The witness and SOHR said fighting continued inside the devastated camp where food, medicine and water are scarce.

The Observatory said Islamic State controlled some of the main streets in the camp.

Addional reporting by Reuters