GUVECCI, Turkey (Reuters) - Syrian rebels have seized a government army outpost near the Turkish border province of Hatay and a rebel flag flew over the building on Sunday, while clashes could be heard in the area of a nearby Syrian village, a Reuters witness and villagers said.

Turkish troops take their position at the Akcakale border gate in southern Sanliurfa province October 7, 2012, as a Syrian Independence flag waves at Syria's Tel Abyad border crossing in the background. Turkey returned fire after Syrian mortar bombs landed in a field in southern Turkey on Saturday, the day after Prime Minister Tayyip Erdogan warned Syria that Turkey would not shy away from war if provoked. It was the fourth day of Turkish retaliation for firing by Syrian forces that killed five Turkish civilians on Wednesday. REUTERS/Stringer

The rebels took control of the three-storey white building, around 1 km (mile) from the border on a hill overlooking the Turkish village of Guvecci on Saturday, and raised the flag of the Free Syrian Army, villagers said.

"In the last four days there were heavy clashes going on here. We couldn't sleep. Yesterday morning, the Syrian army controlled this area. Now it is calmer," said villager Musa Sasak, 27.

Three mortar bombs fired from Syria landed near Guvecci village on Saturday, prompting a fourth day of retaliatory fire from Turkish forces. The Syrian mortar rounds hit empty land and there were no casualties.

The exchanges are the most serious cross-border violence in the Syrian conflict, which began as pro-democracy protests but has evolved into a civil war with sectarian overtones. They highlight how the crisis could destabilise the region.

Clashes could be heard on Sunday in the area of the Syrian village of Khirbet al-Joz, behind the hill where the military outpost was located. Smoke could be seen rising from the area.

The Syrian Observatory for Human Rights said rebels seized control of Khirbet al-Joz and the land around it late on Saturday after a 12-hour battle.

The British-based group, which monitors the violence in Syria through a network of activists across the country, said at least 40 Syrian soldiers, including five officers, were killed. Nine rebels fighters also died, it said. That death toll could not be independently verified.

Prime Minister Tayyip Erdogan warned Syria on Friday that Turkey would not shy away from war if provoked in the wake of artillery fire from Syrian forces which killed five Turkish civilians further east at Akcakale on Wednesday.

NATO member Turkey was once an ally of Syrian President Bashar al-Assad but turned against him after his violent response to an uprising in which, according to the United Nations, more than 30,000 people have died.

Turkey has nearly 100,000 Syrian refugees in camps on its territory, has allowed rebel leaders sanctuary and has led calls for Assad to quit. Its armed forces are far larger than Syria's.

(Additional reporting by Dominic Evans in Beirut; Writing by Daren Butler; Editing by Jon Hemming)

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