(Reuters) - A powerful armed ethnic group in Myanmar said on Sunday it had won control over a town in the western state of Rakhine after weeks of fighting, denying accusations it had targeted members of the Muslim-minority Rohingya during the offensive.

Khine Thu Kha, a spokesman for the Arakan Army (AA), said its soldiers had taken Buthidaung near Myanmar's border with Bangladesh, marking another battlefield defeat for the ruling junta that is fighting opposition groups on multiple fronts.

"We have conquered all the bases in Buthidaung and also took over the town yesterday," Khine Thu Kha told Reuters by telephone.

Some Rohingya activists accuse the AA of targeting the community during the assault on Buthidaung and surrounding areas, forcing many of them to flee for safety.

"AA troops came into downtown, forced the people to leave their homes and started torching houses," Nay San Lwin, co-founder of the Free Rohingya Coalition advocacy group told Reuters, based on what he said were eyewitness accounts.

"While the town was burning, I spoke with several people I have known and trusted for years. They all testified that the arson attack was done by the AA."

Reuters could not independently verify the conflicting accounts. A junta spokesman did not respond to a call seeking comment.

Rohingya have faced persecution in Buddhist-majority Myanmar for decades. After escaping a military-led crackdown in 2017, nearly a million of them live crammed into refugee camps in Bangladesh's border district of Cox's Bazar.

JUNTA'S BIGGEST CHALLENGE

Myanmar has been in turmoil since a 2021 military coup, which led to the rise of the resistance fighting alongside long-established ethnic minority rebel groups.

The conflict has escalated since October, when an alliance of ethnic armies including the AA launched a major offensive near the Chinese border, taking swathes of territory from the better-armed junta and presenting its biggest challenge since taking power.

The junta has lost control of around half its 5,280 military positions, including outposts, bases and headquarters, according to one estimate.

The AA's Khine Thu Kha said junta aircraft and Muslim insurgent groups aligned with the military had set fire to parts of Buthidaung, which had a population of around 55,000 people, according to the most recent government census available, from 2014.

"The burning of Buthidaung is due to the air strikes from the junta's jet fighter before our troops entered the town," he said.

Aung Kyaw Moe, a Rohingya civil society activist and a deputy minister in Myanmar's shadow National Unity Government, said Rohingya residents had been asked by the AA to leave Buthidaung but had responded that they had nowhere to go, leaving them trapped when the offensive occurred.

"Since about 10 p.m. last night up to this early morning, Buthidaung town had been burning and now only ashes remain," he told Reuters.

Rohingya residents fled to the field and there may casualties, he said.

(Reporting by Reuters staff; Writing by Devjyot Ghoshal; Editing by William Mallard)