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Shiite gunmen patrol the streets of Chouweifat south of Beirut

Lebanon is hanging between fears of all-out war and hopes of political compromise as government supporters and opponents battled with rockets and machine guns in the mountains overlooking Beirut.

The fighting saw the collapse of pro-government forces in the Aley region, a stronghold of anti-Syrian Druse leader Walid Jumblatt.

Beirut was quiet on Sunday after Hezbollah gunmen left the streets, heeding an army call for the Shiite fighters to clear out. The city was the focus of four days of Sunni-Shiite clashes that culminated with Hezbollah seizing large swathes of Muslim West Beirut - demonstrating its military might in a showdown with the government.

Thirty-eight people have been killed since Wednesday, when a power struggle between the Hezbollah-led opposition and the US-backed government began erupting into the worst sectarian violence since Lebanon's 1975-1990 civil war.

Arab foreign ministers urged the warring factions to immediately cease fighting and said they will send a delegation to try to broker a settlement between the Hezbollah-led opposition and US-backed government.

After an emergency meeting in Cairo on Sunday on the Lebanon crisis, the Arab League issued a statement implicitly criticising the Shiite militant Hezbollah.

"The ministers reject the principle of resorting to armed violence to achieve political goals," it said.

The violence was sparked when the government confronted Hezbollah with decisions to sack the chief of airport security for alleged ties to the militant group and to declare Hezbollah's private telephone network illegal. Hezbollah leader Hassan Nasrallah said the decisions amounted to a declaration of war.

Overnight, there were fierce clashes in the north, particularly in the city of Tripoli. One woman was killed. Heavy fighting between government supporters and opponents also broke out in the central mountain town of Aytat and surrounding areas, about nine miles from Beirut. As the fighting raged in the mountain region, the violence spread to the nearby towns of Kayfoun, Qamatiyeh, Bchamoun and Chouweifat.

Lebanon prime minister Fuad Saniora said the Cabinet would meet this week to decide what to do about the two decisions against Hezbollah that sparked the violence.