* Clashes in Mogadishu kill 139 civilians since weekend
* Fighting worsens humanitarian crisis says aid groups
By Abdi Sheikh
MOGADISHU, May 14 (Reuters) - Islamist rebels and Somalia's western-backed government and allies exchanged mortar and small arms fire on Thursday in the seventh day of clashes in the capital Mogadishu that have killed 139 civilians.
Years of conflict in Somalia have killed tens of thousands, displaced millions more, defied 15 attempts to establish central rule and created one of the world's worst aid crises.
"Twenty-six civilians died and 98 were injured on Wednesday and Thursday," said Yasin Ali Gedi, vice chairman of the Mogadishu-based Elman Peace and Human Rights group.
"Thousands have also evacuated in this period, because fighting has spread to new districts," he said.
The militant al Shabaab and forces loyal to President Sheikh Sharif Ahmed continued to battle in Mogadishu. Pockmarked buildings near the presidential palace shook from the latest bout of clashes, which have plagued the country since dictator Mohamed Siad Barre was ousted in 1991.
Residents accused African Union peacekeepers (AMISOM) of shelling insurgent strongholds. Like most guerrilla wars, rebels stage hit-and-run attacks and hide amongst the populace.
"I saw them transporting 10 dead bodies and dozens of injured in mini-buses," resident Abdi Hussein said.
"They were all opposition, because they were masked. Government soldiers also died, but I could count only three. I'm sure there are more. We were running from the shelling of AMISOM," he said.
AU spokesman Barigye Ba-Hoku said: "We are neither involved in fighting nor shelling ... The opposition blames shelling on us as an excuse to attack our bases."
Aid organisations warned on Thursday that Somalia's worst fighting in months was aggravating an already dire humanitarian emergency in the Horn of Africa nation [nLE912202].
Once famed for its open cafes and safe streets where residents took nightly strolls -- known as "passagiato" from the former colonial rulers, Italy -- Mogadishu is now synonymous with anarchy and evokes images of militias atop battle wagons.
A respite from more than a decade of violence following a takeover by the Islamic Courts Union in 2006 was short-lived, and battles erupted again when Ethiopian tanks and troops crushed the sharia courts movement later that year.
An Islamist-led insurgency since early 2007 has killed some 17,700 people and wounded almost 30,000 others, Elman says. (Additional reporting by Abdi Guled and Ibrahim Mohamed; Writing by Jack Kimball; Editing by Janet Lawrence)