Alassane Ouattara's forces launched an assault on the home of Laurent Gbagbo, who refuses to stand down as president.
After hours of fighting, Mr Ouattara's men pulled back in the face of heavy fire from within Mr Gbagbo's residence.
Mr Gbagbo insists he won November's run-off vote, but election officials found Mr Ouattara was the winner.
That result was certified by the UN, but Mr Gbagbo has refused to leave office.
Mr Gbagbo and his family are believed to be sheltering in the bunker of his residence, in an upmarket area of Abidjan, Ivory Coast's main city.
He says Mr Ouattara's troops want to kill him, while they say they have strict orders to capture him alive.
Speaking by phone to French radio and sounding defiant, Mr Gbagbo denied he was hiding in a bunker.
"I am in the residence - the residence of the president of the republic. When it rains, can't one take shelter inside one's house?"
Mr Gbagbo had earlier denied he was surrendering, saying he was only negotiating a truce.
In a separate development late on Wednesday, French helicopters carried out an operation to evacuate the Japanese ambassador, whose Abidjan home was besieged by mercenaries, a source close to the rescue operation told the AFP news agency.
Troops 'in the building'Gun, rocket and mortar fire was reported around Mr Gbagbo's residence during Wednesday.
Carrying automatic weapons and approaching the compound in pickup trucks modified to carry heavy machine guns, Mr Ouattara's troops attempted to storm the residence to spring Mr Gbagbo from his hideaway.
Continue reading the main story Andrew Harding BBC News, AbidjanA negotiated ending might have helped ease tensions in this bitterly divided country. After all, Mr Gbagbo won 46% of the vote in the recent election.
But he seems to have overplayed a weak hand, and so a more forceful denouement beckons, and with it the real risk of greater instability.
What will his militias do if Mr Gbagbo is killed, or dragged out and humiliated?
Civilians, still trapped in Abidjan, say there has been sporadic gunfire across the city, with pro-Gbagbo militias still on the streets, and Ouattara force's still "mopping up" opposition at several military installations.
The stench of dead bodies, littering the sides of the road, is a powerful reminder of the price this city has paid for the "restoration of democracy".
But they faced stiff resistance from inside the property's walls, where Mr Gbagbo's supporters were said to be dug in with mortars and rocket launchers.After several hours of fighting the sounds of battle died away.
Local residents, Western officials and representatives of Mr Ouattara's forces conceded that Mr Gbagbo's men had held out.
"We retreated but we are preparing for a second assault," a spokesman for the fighters, Yves Doumbia, told the Associated Press new agency.
The BBC's John James, outside Abidjan, says a new standoff appears to be developing, with the anti-Gbagbo forces possibly regrouping for an overnight assault.
"There are still some mortars and tanks in the presidential compound - the offensive was suspended for a few hours," French news agency AFP quoted a French official in Abidjan as saying.
Earlier, French Foreign Minister Alain Juppe said Mr Gbagbo's "intransigence" had led to the collapse of UN-brokered talks aimed at negotiating an orderly departure.
"The conditions set by President Ouattara are very clear: he demands that Laurent Gbagbo accepts his defeat and recognises the victory of the legitimately elected president," he told parliament.
"That's where we stand today, so sadly the arms have begun to talk again."
France - the former colonial power in Ivory Coast - has troops in the country alongside UN peacekeepers. They are attempting to maintain security around Abidjan under the terms of a UN Security Council resolution.
Mr Juppe said neither French nor UN troops were involved in the offensive against Mr Gbagbo.
Civilians under siegeAs the two sides continue to battle for the presidency, concern is growing over the humanitarian situation in Ivory Coast.
Following two days of advances in Abidjan by pro-Ouattara forces the city's four million people remain mainly inside their homes.
Soldiers, ex-rebel fighters, militia groups and mercenaries are battling for control of the streets, says the our correspondent. The main banks have been closed for nearly two months and few people have the funds to stock up on food.
Continue reading the main story 28 November: Incumbent Laurent Gbagbo and challenger Alassane Ouattara in election run-off2 December: Electoral commission announces that Ouattara has won3 December: Constitutional Council declaring Gbagbo the winner; UN says Ouattara was victor30 March: Pro-Ouattara forces enter the capital, Yamoussoukro4 April: UN launches air strikes on Gbagbo in main city, Abidjan5 April: Three generals negotiate Gbagbo's surrenderThe UN and the Red Cross have both voiced their concern for the civilians caught up in the fighting. The Red Cross has described the humanitarian situation as "worsening" and is beginning to distribute 12 tonnes of aid to those judged most in need.Tens of thousands of people have fled their homes to escape the violence, with the UN refugee agency reporting an increase in the number of Ivorians crossing the border into neighbouring Liberia.
The International Criminal Court says it is preparing to investigate reports of human rights abuses during the fighting.
Last November's election was intended to reunite Ivory Coast which split in two following a northern rebellion in 2002.
The electoral commission pronounced Mr Ouattara the victor, but Ivory Coast's Constitutional Council said Mr Gbagbo had won.
The US, the UN and the EU recognised Mr Ouattara as the winner, but both candidates had themselves sworn in as president and a stand-off ensued.
Skirmishes and battles between the rival forces have since taken place across Ivory Coast, culminating in Mr Ouattara's troops sweeping into Abidjan at the end of March.
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