South Sudan's army said it had lost control of the flashpoint town of Bor, after clashes were reported with fighters loyal to the country's former vice president Riek Machar.
Fighting that erupted in the capital Juba late on Sunday spread to Bor, north of the capital and scene of an ethnic massacre in 1991, witnesses said, raising fears of a slide into civil war.
South Sudan's President Salva Kiir has accused Mr Machar of starting the fighting and trying to stage a coup, charges denied by Mr Machar.
The president sacked Mr Machar in July and political tension has simmered since then in the oil producing nation.
A journalist in Bor said that troops led by commander Peter Gadet, a Machar ally, had taken control of the bases, abandoned by the outnumbered Dinka soldiers.
A broader conflict could threaten vital aid and be exploited by neighbouring Sudan, which has had persistent rows with the South over their undefined borders, oil and security.
That would further hurt efforts to build a functioning state in the South.
In Juba, residents reported a tense calm after sporadic gunfire overnight, with traffic returning to the streets.
But the US State Department said it was organising evacuation flights and Britain said it was gathering the names of any citizens who wanted to leave.
Other western nations were expected to follow. Many aid workers live and operate in Juba.
The government said it arrested ten people, including seven former ministers, over the "foiled coup" and wanted to question several others, including Mr Machar.
Diplomats said the United Nations had reports of between 400 and 500 people killed and up to 800 wounded in the nation, which declared independence in 2011 from Sudan, after decades of civil conflict that left the south with barely any tarmac roads.
"Most people are scared they might be confronted with a mob or see dead bodies," said one aid worker in Juba, adding that the city was calmer this morning, after residents awoke to heavy gunfire and artillery blasts yesterday and on Sunday.
Political tension has been mounting since Mr Machar's dismissal. The former vice president has said he would run for president and has accused Mr Kiir of being dictatorial.
Mr Kiir had said before the clashes that his rivals were reviving rifts that provoked infighting in the 1990s.
He has faced public criticism for doing little to improve life in one of Africa's poorest nations.