Forces loyal to Ivory Coast's incumbent leader Laurent Gbagbo have gained ground in Abidjan, the UN says.
UN peacekeeping chief Alain Le Roy said Mr Gbagbo's forces, still using heavy weapons, had used a lull for peace talks to strengthen their position.
Mr Ouattara's forces have been battling Laurent Gbagbo, who is bunker in Abidjan, the country's main city.
Mr Le Roy said Mr Gbagbo's troops now fully controlled the upscale Plateau and Cocody areas of Abidjan.
"They clearly used the lull of Tuesday as a trick to reinforce their position," Mr Le Roy said, referring to a dip in the fighting after three of Mr Gbagbo generals requested talks.
He said that there was evidence that his forces were still using weapons including tanks, M-21 rocket launchers, rocket-propelled grenade launchers and armoured personnel carriers.
Earlier, the European Union said it had agreed to ease sanctions imposed against the country.
Alassane Ouattara, the country's internationally recognised president, had appealed for the easing to enable cocoa exports in the world's largest producer of the crop to resume.
Heavy-weapons fire from Mr Gbagbo's forces targeted the French ambassador's residence in the city on Friday, the French embassy said.
A spokesman for Mr Gbagbo said his forces had not attacked the building.
Ahoua Don Mello said he "formally denied" the French embassy's statement that the house had been targeted by two mortars and a rocket from positions held by Gbagbo's forces, AFP reports.
Ports to re-open
Following Mr Ouattara's plea, the EU announced it would lift four sets of sanctions imposed on the world's biggest cocoa producer.
"Under the measures adopted today, the ports of Abidjan and San Pedro, the Ivorian Refining Company and the Coffee and Cocoa Trade Management Committee are removed from the list of entities subject to the EU assets freeze," the EU said in a statement.
The UN has certified Mr Ouattara as the winner of November's run-off vote for president but Mr Gbagbo has refused to cede power.
Mr Ouattara's forces have swept down from the north over the past two weeks but much of the main city of Abidjan is dominated by Gbagbo supporters and days of fighting have plunged it into crisis.
As the military standoff continued in Abidjan, the United Nations said that more than 100 bodies had been found in three locations in the west of the country, the victims of apparent ethnic killings.
UN High Commissioner for Human Rights Navi Pillay described the reports that the team in Ivory Coast was sending back as "utterly horrifying".
UN relief agencies have warned of a looming crisis and called for humanitarian corridors to allow safe passage for thousands of people fleeing the fighting.
In Abidjan, pro-Ouattara forces continue to besiege Mr Gbagbo in his residence.
Mr Ouattara said a blockade had been set up around the perimeter to make the district safe for residents. He said his forces would wait for Mr Gbagbo to run out of food and water.
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