|Palestinian refugees desperate to get out|
Clashes erupted between the militants and groups inside the camp, with IS seizing control of large parts of the camp, reports said.
The UN says about 18,000 Palestinian refugees are inside the camp.
IS militants have seized large swathes of territory in eastern Syria and across northern and western Iraq. But this is the group's first major attack near the heart of the Syrian capital.
IS fighters had seized control of large parts of the camp, the UK-based Syrian Observatory for Human Rights, and an official with the Palestine Liberation Organisation based in Damascus, said.
Yarmouk residents told BBC Arabic that members of Aknaf Beit al-Maqdis, a group formed by Palestinian militiamen opposed to the Syrian government, were leading the fight against the IS militants, along with some Free Syrian Army fighters.
Palestinian militiamen were able to retake some areas from IS later on Wednesday, residents told the BBC. There has been no official statement from IS about the attack.
Children at risk
Unrwa, a UN relief agency for Palestinian refugees, said in a statement that the fighting would place Yarmouk's civilians, including large numbers of children, "at extreme risk of death, serious injury, trauma and displacement".
And we know what IS does with young girls and women.
It demanded an end to the fighting and "a return to conditions that will enable its staff to support and assist Yarmouk's civilians".
|File photo: Residents of the besieged Palestinian camp of Yarmouk queue|
to receive food supplies in Damascus, Syria, 31 January 2014
The UN says Yarmouk is on the brink of a humanitarian catastrophe
Members of the self-proclaimed Islamic State stormed into the southern side of Yarmouk camp in the early hours of the morning and clashed with the Palestinian brigade, Aknaf Beit al-Maqdis.
Reports suggest they came in from the area of Hajar al-Aswad in the south of the capital.
The Palestinian Ambassador to Damascus, Anwar Abdulhadi, told the BBC that the group had seized the area of the camp near the Palestine Hospital.
Most information is coming from Palestinian officials in areas under government control.
The attack comes days before a deal to ease the humanitarian situation for civilians in the camp was set to come into operation.
The battle between forces loyal to President Bashar al-Assad, rebels opposed to his rule and jihadist militants from Islamic State has also driven more than 11 million people from their homes.
The al-Qaeda linked al-Nusra Front captured the north-western city of Idlib from government forces on Saturday. It is only the second provincial centre to fall into rebel hands since IS seized Raqqa in March 2013.
|Civilians chat with an Islamist rebel fighter (2nd left) as they stand |
near the wreckage of a vehicle along a street in Idlib city, 1 April 2015
Idlib has been subjected to severe fighting between government and rebel forces
Also on Wednesday, Jordan closed the Nasib border crossing, its only official crossing with Syria, due to fierce clashes between Syrian rebels and government troops.
Rebel forces were able to wrest control of the crossing from the Syrian government by Wednesday evening, reports said. A leader of the Yarmouk Army, one of the rebel groups, said the crossing had been "liberated", Reuters reported. A government security source also confirmed the seizure.
First built for Palestinians fleeing the 1948 Arab-Israeli war, Yarmouk was once considered by many to be the de facto capital of the Palestinian refugee diaspora.
Prior to the Syrian civil war, it had more than 150,000 refugees living there, and its own mosques, schools and public buildings.
However, the camp has been besieged by fighting between government troops and rebel forces since 2012.
Unrwa says about 18,000 refugees remain trapped in the camp, with inadequate access to food supplies, clean water and electricity.
In March, Unrwa said: "The extreme hardship faced by Palestine refugees in Yarmouk, but also in other locations in Syria as a result of the armed conflict is, from a human point of view, unacceptable."