Prime Minister Abiy Ahmed's federal forces have hit Mekelle from the skies at least eight times in the last two weeks, residents say, in a fight against local Tigrayan forces that has killed thousands and uprooted more than two million people.
Foreign powers are pressing for mediation and the United States is threatening sanctions to stem a conflict reverberating across the already volatile and impoverished Horn of Africa.
Ethiopia's government said Thursday's air strike hit and destroyed the other part of Mesfin Industrial Engineering PLC, a factory complex bombed last week where it said the Tigray People's Liberation Front (TPLF) stored military equipment.
But TPLF spokesman Getachew Reda said the strike hit the Kebele 05 residential neighbourhood, killing three people, inuring several others and destroying three houses.
Hayelom Kebede, a doctor at Mekelle's Ayder Referral Hospital, told Reuters that so far 10 people have died as a result of the strike and 21 were injured.
He predicted the death toll would rise because medical care is severely constrained.
Another doctor told Reuters he saw six people pulled out of rubble in Kebele 5 but he could not tell if they were alive or dead.
Tigrayan TV showed pictures of Red Cross workers near collapsed brick structures with corrugated iron rooves.
Blankets and kettles lay among bloodstained wreckage.
At one point, gloved volunteers hastily covered a body part with a sheet.
A resident of the city who visited the site said he saw a five-year-old transported alive from the rubble to hospital.
Asked about reported civilian deaths, government spokesman Legesse Tulu replied in a text message: "There is not any intended and deliberate harm on civilians and their properties. The air strike successfully hit its target."
With communications mainly down in Tigray, it was impossible to independently verify events.
The TPLF, which says it is fighting discrimination by central government, was forced out of Mekelle at the end of last year, accused of rebellion and attacking an army base.
But its soldiers swept back from the surrounding mountains and now control most of Tigray and parts of two neighbouring regions - Afar and Amhara - where fighting has also intensified.
The government says it is targeting sites where the TPLF is training, storing equipment or otherwise using facilities for its war effort.
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