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ABIDJAN/BOUAKE, Ivory Coast (Reuters) - Rebels controlling northern Ivory Coast have seized a town in government territory and said on Friday they were still advancing, raising the prospects of a return to open war.

Loyalists of Laurent Gbagbo, clinging to power after an election most of the world says he lost, confirmed the fall of Zouan-Hounien in an overnight attack and said they would fight to take it back.

"We're in the process of re-organising ourselves," Yao Yao, head of operations of the pro-Gbagbo Front for the Liberation of the Greater West militia told Reuters by phone from the region.

The small, remote town lies in western Ivory Coast near the forested border with Liberia and is not on a key axis, but the fighting there marks a major escalation.

United Nations Secretary-General Ban Ki-moon warned that clashes this week in the main city, Abidjan, and in the west have taken the world's top cocoa grower closer to the brink of a new civil war.

Rebel spokesman Ouattara Seydou said the New Forces had been attacked from Zouan-Hounien and were moving south to another town held by Gbagbo loyalists.

Ivory Coast's spiral back towards a war fuelled by ethnic animosities follows an election last November which Gbagbo's rival Alassane Ouattara is almost universally recognised to have won.

Gbagbo, in power for more than a decade, has refused to leave the presidency of once prosperous Ivory Coast, which has been split between north and south since a 2002-03 war.