"Shelling was heavy in the night and it has continued sporadically since 7:30 am (0330 GMT)," said Aref Ruzhdi, a senior official with Iraqi President Jalal Talabani's Patriotic Union of Kurdistan party.

"Hundreds of Kurds have had to flee to safer areas."

Iranian forces were targeting positions nearly 200 kilometers (115 miles) north of Iraqi Kurdistan's Sulaimaniyah province held by the Kurdistan Workers' Party which opposes Ankara's rule in southeastern Turkey, Ruzhdi said.

The shelling reportedly took place north of Ranya, 25 kilometers inside Iraqi territory.

"I believe the Iranians are working in coordination with the Turkish military," Ruzhdi said in comments that followed initial reports of shelling by a PKK leader in Iraq, Rustom Judi, on Monday.

"We have casualties," Judi told AFP, but did not provide further details.

A school and a vehicle were destroyed in the bombardment of the mountainous area, Ruzhdi said.

On Sunday, Iraq's defense ministry said Iranian forces had entered Iraqi territory and shelled PKK positions over a period of 24 hours.

Iran on Monday refused to confirm or deny its troops had crossed into Iraqi soil.

"I do not confirm the entry of our forces into the territory of neighboring countries, notably Iraq," government spokesman Gholam Hossein Elham told reporters in Tehran.

"We have security cooperation accords with neighboring countries and we act within the framework of these accords. There is no cause for concern over this kind of thing with neighboring countries," he said.

Iran is bound by treaty with Turkey to fight the outlawed PKK, which has waged a 15-year insurgency against Ankara for self rule in Turkey's mainly Kurdish southeast.

In return, Turkey has pledged to fight the Iranian armed opposition group, the Iraq-based People's Mujahedeen.

Turkey says some 5,000 armed PKK militants have found refuge in northern Iraq since 1999, when the group declared a unilateral ceasefire after the capture of its leader, Abdullah Ocalan.

The truce was called off in June 2004.

"I warn Iran that their aggression against our party's positions in Iraq will have consequences," Judi said after an April 20 attack.

That Iranian shelling killed at least two people and injured 10 others in Iraq, the PKK said, while a group linked to the rebels, Pejak, killed four fighters inside Iran in weekend violence, Iranian media and Pejak said.

Kurds make up the majority in three adjacent areas within Iraq, Iran and Turkey.

Tehran and Ankara have accused a number of separatist rebel groups of exploiting Kurdish-controlled areas in Iraq to launch attacks inside their countries.

For around a year, Iran has been battling border infiltrations by Pejak, with reports claiming that at least 120 Iranian police were killed and scores were wounded in the attacks blamed on the group.

Meanwhile, Turkey has massed troops along the border to intensify operations against PKK rebels sneaking into Turkey in growing numbers with the arrival of spring as snow melts and makes passage through the mountains easier.

Turkey has long urged the United States and Iraq to root out the PKK from its bases in the mountains of northern Iraq, but it has been told that violence in other parts of the conflict-torn country was their priority.

US Secretary of State Condoleezza Rice called on Ankara during a visit last week to refrain from unilateral action against the Iraq-based Kurdish rebels, calling instead for renewed three-way cooperation to fight the threat.

The Kurdish conflict has claimed more than 37,000 lives since the PKK launched its separatist campaign in 1984.

Washington labels the PKK as a "terrorist" organization.