The Sudan Liberation Army claims that the Sudanese army raided the town of Muhajiriya, killing at least 40 civilians.
The rebels say another 80 people are missing and that the victims look like they have been executed.
The African Union has confirmed that an attack took place.
It says the reasons for the assault are likely to be tribal tensions or a spillover from clashes between the rebels and government troops.
The Sudan Liberation Army says the attack has lessened the chances of finding a breakthrough at peace talks scheduled later this month. © 2007 Australian Broadcasting Corporation