Helicopter gunships pounded the city centre and there was heavy street fighting, in which at least a dozen people were killed, after Chechen fighters seized a hospital and several buildings, according to news reports from the area.
A statement by the Russian military command in Chechnya said that about 600 rebels took part in the fighting in Gudermes, which lasted all day, and were "hiding in residential areas, actually behind the backs of civilians, and firing at federal troops sent to the town''.
Details of the conflict were still sketchy last night, as Russian troops reportedly had sealed off the entire city, which lay under a veil of black smoke. But one Russian soldier manning a checkpoint about three miles away told Reuters there were "very many" dead and wounded. Another said that the Chechen fighters had "taken almost the entire town", which is about 20 miles east of Grozny.
In June, Chechen rebels took 1,000 people hostage after seizing a hospital in the southern Russian town of Budennovsk in a conflict in which 100 people died. This time - according to the Itar-Tass news agency - they took a hospital, but allowed almost all patients and doctors to leave unharmed, detaining only one person. Reports were trickling in last night of violence in two other towns, Novogroznensky and Shatoi.
The attack came on the first day of voting in local and national elections in Chechnya which the Kremlin - to the astonishment of many observers - has insisted on holding, but which the rebels have long vowed to disrupt.
The Russian authorities decided to open the polling booths for three days, a move which was intended to ensure that enough people vote to make the election legitimate. The threshold has been lowered from the customary 50 per cent turnout to 25 per cent, and numbers have been boosted by allowing those Russian soldiers permanently based in Chechnya to take part.
The chances that the elections in Chechnya will run their course are lessening. There also were exchanges of gunfire in Grozny yesterday, where only one polling booth - used by the local Russian-backed administration - remained open by lunchtime.
The Kremlin wants the election - which is expected to return the present Russian- backed prime minister, Doku Zavgayev, to office - to lend legitimacy to the puppet administration in the republic. It is difficult to believe, however, that anyone beyond a stone's throw from the Red Square will take the results seriously. The poll is not subject to any independent monitoring.
Yesterday's developments will do nothing to improve the standing of President Boris Yeltsin, whose decision to invade Chechnya a year ago caused deep resentment.
Indeed, coming only three days before polls to elect a new State Duma, or lower house, the latest fighting will do little to advance the cause of the government-backed party.
Tomorrow President Yeltsin will addressthe nation. Currying favour among an angry and disillusioned electorate always was going to be an uphill task. Now his job is harder still.