The Myanmar military has taken control of a small town in western Chin state, close to the border with India.
The town of Mindat had taken up arms against the junta just three weeks back.
Fighters of volunteer Chinland Defence Force said that they have pulled back from the northwestern town of Mindat after days of assault by combat troops backed by artillery.
The rebels said six of their fighters had died.
The small hill town of Mindat, about 100 km from the Indian border in Chin state of Myanmar, has witnessed some of the heaviest fighting since the coup plunged Myanmar into chaos.
“We will not stay any more in the town… but we will come back to attack soon,” a spokesman for the rebel group said, quoted by AFP news agency.
“We only have homemade guns. This was not enough,” the rebels said.
“We retreated out of concern over damage to the town,” said one fighter.
With fighting taking place so close to the India-Myanmar border, it is being feared that a large-scale migration of refugees from the neighbouring country into India might take place.
Meanwhile, the US and UK have condemned the violence.
“The military’s use of weapons of war against civilians, including this week in Mindat, is a further demonstration of the depths the regime will sink to hold onto power,” the US embassy said in a statement.
“Attacks on civilians are illegal and cannot be justified,” the British embassy said.