ABIDJAN (Reuters) - Rebels in eastern Congo advanced to the outskirts of the city of Uvira near the Burundi border on Wednesday, residents said, sowing panic and confining thousands of civilians to their homes.

The fighting between the Mai-Mai Yakutumba militia and the army was the latest example of mounting insecurity in Democratic Republic of Congo since President Joseph Kabila refused to step down when his mandate expired last December.

The violence in eastern and central Congo has displaced over 1.5 million in the past year and revived fears of civil war in a country where conflicts from 1996-2003 killed millions and spawned dozens of armed groups that continue to prey on local populations and exploit natural resources.

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Yakutumba fighters, who mostly oppose Kabila, advanced to hillsides about five km (3 miles) outside the lakeside city by mid-afternoon on Wednesday and army reinforcements deployed to try to push them back, according to Lubungula Dem's M'Sato, a member of a peace-building advocacy group in Uvira.

"The Yakutumba elements started advancing toward Uvira this morning," M'Sato told Reuters. "The gunfire is still ongoing ... Everyone is at home."

The Catholic bishop of Uvira, Sebastien Muyengo, said by telephone that heavy gunfire could be heard on-and-off in the hills throughout the day but that the shooting had mostly abated by early evening.

Local army spokesman Dieudonne Kasereka said the military remained in control of Uvira, which lies about 25 km (15 miles) west of Burundi's capital Bujumbura, where low-level political violence erupts periodically.

Mai-Mai Yakutumba, which was formed in 2007 by local militiamen opposed to integration in Congo's national army, says it is spearheading a coalition of armed groups committed to driving government forces from the area.

It briefly seized several towns during clashes with the army in late June that forced 80,000 people to flee their homes [nL3N1JU48L}.

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The fighting has affected local gold mining operations. Canada's Banro Corp said on Tuesday it had temporarily suspended operations at its Namoya mine in a neighboring province due to road closures forced by armed groups, the latest in a series of security incidents to hit its mines in the area.

U.N. peacekeepers, sharply criticized in 2012 for failing to prevent eastern Congo's largest city of Goma from falling to another rebellion, intervened in Uvira on Wednesday to drive off several purported militiamen who attacked the city's prison, a security source said. A U.N. spokeswoman could not be immediately reached for comment.

(Reporting by Aaron Ross; Editing by Emma Farge/Mark Heinrich)