Hundreds fled Damascus flashpoint districts on Thursday amid a surge of fighting following a bomb attack which killed three security chiefs, as residents reported shops closed and food shortages.
Major General Robert Mood, head of the UN monitoring mission, warned that Syria was not on track for peace and that the violence was spiralling, as President Bashar al-Assad appeared to have gone to ground.
The military gave residents 48 hours to leave areas where clashes are taking place between security forces and rebels pushing their "Damascus Volcano" offensive.
"These extremely violent clashes should continue in the next 48 hours to cleanse Damascus of terrorists by the time Ramadan begins" on Friday, a security source told AFP, referring to the Muslim holy fasting month.
The Britain-based Syrian Observatory for Human Rights watchdog said that in the western district of Mazzeh alone, hundreds of people were on the move, "fearing a large-scale operation by regime troops."
Residents also fled the southern district of Tadamon and the Palestinian refugee camp Yarmuk, it said.
The situation "is worse than catastrophic," one Damascus resident told AFP. "People are fleeing from the shelling."
"The medical and humanitarian situation is getting worse," she said.
"Several of my neighbours have knocked on my door asking for bread, because most of the shops in the neighbourhood are closed."
Another said: "Shops, streets and universities are all closed. The smell of blood is filling Damascus."
On Wednesday a bombing in the city killed three top security officials, including the defence minister and Assad's brother-in-law.
"There is an escalation by the Syrian regime to avenge the operation that targeted the (security chiefs)," said Rami Abdel Rahman, head of the Britain-based Observatory.
"The rebels have also escalated to reap the fruits of the attack, and to try to finish off the battle" for Damascus, he added. "Clashes and shelling have engulfed Syria, and they are taking place day and night."
Syrian National Council spokesman George Sabra told AFP: "We see that what happened is a sign of the beginning of the end of the regime. It was a major blow to (Assad) and the regime's repressive security apparatus."
Assad's whereabouts are still not known and he has not commented on the bombing or appeared in public since the attack.
However, he was cited by state media as appointing Fahd al-Freij defence minister to replace Daoud Rajha, who was among those killed when the National Security headquarters was targeted.
State media have yet to distribute images of the aftermath, unlike on previous occasions involving attacks in the capital.
The deaths of Rajha, Assad's brother-in-law Assef Shawkat and General Hassan Turkmani, head of the regime's crisis cell, marked the first time in the 16-month revolt that Assad's inner circle has been targeted.
"The army has so far exercised restraint in its operations, but after the attack, it has decided to use all the weapons in its possession to finish the terrorists off," the security source said.
"The army has told residents to stay away from combat zones, as the terrorists are trying to use residents as human shields."
The Damascus blast came on one of the deadliest days in the conflict.
At least 214 people -- 124 civilians, 62 soldiers and 28 rebels died on Wednesday, the Observatory said. That figure did not include the three regime members.
'Not on track for peace'
"It pains me to say, but we are not on the track for peace in Syria, and the escalations we have witnessed in Damascus over the past few days is a testimony to that," General Mood, head of the UN Supervision Mission in Syria, said in a statement to reporters.
The deteriorating situation comes as the West, Russia and China prepare for a showdown later on Thursday over a draft UN resolution calling for sanctions against Syria.
UN chief Ban Ki-moon and international envoy Kofi Annan called on the Security Council to take strong action, but Russia and China are expected to veto the resolution.
Ban said there was an "extreme urgency" for action to halt the violence which activists say has killed more than 17,000 people.
Annan, the UN-Arab League envoy, said the council must take "decisive" action after he persuaded the major powers to postpone the vote originally set for Wednesday.
"The deteriorating situation in Syria underscores the extreme urgency for all sides to stop armed violence in all its forms, implement the six-point plan and move swiftly towards a political dialogue," Ban said in a statement.
Annan "urged members of the Security Council to unite and take concerted and strong action that would help stem the bloodshed in Syria and build momentum for a political transition," said his spokesman Ahmad Fawzi.
Wednesday's attack also wounded interior minister Mohammed al-Shaar and General Hisham Ikhtiyar, head of National Security, and was claimed by the rebel Free Syrian Army as well as another group, the Brigade of Islam.
"The traitors, agents and mercenaries are deluding themselves if they think that Syria will bow to this strike, even if it hurts," the ruling party's mouthpiece, Al-Baath newspaper, said on Thursday.
Israeli defence minister Ehud Barak, touring the occupied Golan Heights, called the bombing "a severe blow" to Syria's alliance with Iran and Lebanon's Hezbollah.
And British Prime Minister David Cameron told reporters in Afghanistan: "It is time for transition in this regime... but if there isn't transition it's quite clear there is going to be civil war."