Gunfore erupted in the western Mexico town of Nueva Italia on Sunday afternoon as hundreds of vigilantes pressed their fight over territory with the Knights Templar drug cartel.

Members of the self-defence groups entered Nueva Italia in Michoacan state on a campaign they say is meant to liberate towns from the control of the cartel.

Opponents and critics claim that the vigilantes are backed by a rival cartel, but the groups vehemently deny the allegation.

State Governor Fausto Vallejo gave a brief statement on Sunday saying he had formally asked the federal government for more help to quell the violence.

Hundreds of vigilantes had driven into Nueva Italia in a caravan of large trucks, then surrounded the city hall and disarmed local police.

Journalists witnessed citizens initially welcoming them, but shooting broke out almost immediately in and around the town square.

Gunfire could also be heard around the city.

Governor Vallejo acknowledged that violence had gone on for four days as vigilantes appeared to be advancing and surrounding the farming hub of Apatzingan, which is said to be the Knights Templar's central command.

The self-defence groups claim local police are in the employ of the cartel.

Fighting between vigilantes and alleged cartel members has wracked Michoacan for almost a year.

President Enrique Pena Nieto's government has sent thousands of federal police and soldiers to the state, but the situation continues to worsen.

Both federal police and soldiers were seen near Nueva Italia on Sunday but didn't intervene in the fighting.

Authorities reported finding a burned lorry and the bodies of two men hanging from a bridge in the area around the town.

The federal government has said the civilian vigilante groups are operating outside the law.

They carry high-calibre weapons that Mexican law reserves for military use. But government forces have not moved against them and in some cases are reportedly working in concert with the vigilantes.

Rumours are circulating that some self-defence groups have been infiltrated by the New Generation cartel, which is reportedly fighting a turf war with the Knights Templar in the state.