By Sahra Abdi Ahmed

KISMAYU, Somalia, Aug 21 (Reuters) - The African Union said on Thursday that a pact between Somalia's government and some opposition figures was a very significant step, but fighting in the southern port of Kismayu dented hopes of a breakthrough.

President Abdullahi Yusuf's interim administration signed the peace agreement on Monday at U.N.-led talks in Djibouti. The deal, which was first initialled in June, calls for the rapid deployment of U.N. peacekeepers to halt the bloodshed.

"The AU reiterates its determination to support the TFG (Transitional Federal Government) and other Somali stakeholders as they strive to bring an end to the violence that has plagued Somalia for so many years", the AU said in a statement.

It said it would work closely with the United Nations to ensure the early deployment of U.N. troops but gave no details.

The deal has been rejected by opposition hardliners and the U.N. Security Council has been reluctant to commit U.N. forces.

Fighting pitting Islamist rebels against government troops and their Ethiopian military allies has killed more than 8,000 civilians and uprooted 1 million since the start of last year.

Most of the turmoil has plagued the bombed-out capital Mogadishu. But the latest violence broke out on Wednesday and continued on Thursday in the southern port of Kismayu.

Residents said more than 20 people died, mostly insurgents.

"First the rebels hurled a hand grenade at a clan militia's battle wagon, killing three civilians and wounding eight others," witness Osman Farah told Reuters.

"As a result, the two groups exchanged fire and many died."

A spokesman for the al Shabaab insurgent group, which the United States says is a terrorist organisation with close ties to al Qaeda, said his forces were behind the attack in Kismayu.

He gave no other details. (Additional reporting by Tsegaye Tadesse in Addis Ababa; Writing by Wangui Kanina; Editing by Daniel Wallis and Angus MacSwan)

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