Military planes carried out at least two air strikes on Laukkai city, normally home to some 25,000 people, late on Thursday night, a resident told AFP, requesting anonymity for security reasons.
Local media quoted one resident as saying 10 civilians were killed in the strike.
Myanmar's northern Shan state has been rocked by fighting since late June when an alliance of ethnic minority armed groups renewed an offensive against the military along a major trade highway to China.
The Myanmar National Democratic Alliance Army (MNDAA) group have held Laukkai since January after more than 2,000 junta troops surrendered there in one of the military's biggest defeats in decades.
MNDAA spokesman Li Jiawen told AFP a military airstrike had hit a hospital in Laukkai, but he had no information yet on casualties.
The junta has been approached for comment.
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