Fighting between Iranian military forces and Kurdish separatists has displaced hundreds of villagers in the border regions of northern Iraq, the Red Cross said on Monday.

In addition, Iranian shelling killed two villagers and wounded two others before dawn in Sidakan district, some 100 kilometres (60 miles) northeast of Arbil, said Ismail Maqsud, head of the city's Souran hospital.

Iran launched a major offensive Saturday against rebel Kurdish bases in Iraq in which eight of its own elite Revolutionary Guards were killed. The separatist Party of Free Life of Kurdistan, or PJAK, said it had lost two fighters.

"The International Committee of the Red Cross has provided humanitarian assistance to over 800 internally displaced people in northern Iraq, all of whom have been driven from their homes by the recent shelling in the mountains of Qandil," along the border, the ICRC said in a statement.

"Having left behind all their belongings, the majority of these people are now living under makeshift shelters, tents, or sharing crowded houses with relatives and friends, while a few families could afford renting very basic accommodation," it said.

Meanwhile, the Geneva-based International Organisation for Migration said Sunday it was involved in relief efforts in the area, providing basic needs such as beds, plastic furniture and water purification kits.

"Ongoing fighting between Iranian military forces and Iraqi Kurdish separatists has led to the displacement of hundreds of families," the IOM's Iraq mission said.

"The families had been forced to abandon their homes and move to a camp several miles (kilometres) away after numerous artillery strikes on the village. One villager was reported wounded by the strikes, which damaged several homes and the local school," it said in a statement.

PJAK rebels operate out of bases in Iraq's autonomous Kurdish region, and have been involved in deadly clashes with Iranian troops for many years.

The regional government in Iraqi Kurdistan has demanded Iran respect the border after a Revolutionary Guards commander said Iranian forces had taken "full control" of three PJAK camps inside Iraq.

In Tehran, the commander of the Guards' ground forces, Brigadier General Mohammad Pakpour, demanded Baghdad and the Kurdish regional authorities prevent the rebels from attacking Iran from Iraqi territory.

Iranian forces have repeatedly shelled border districts of Iraq's Kurdish region, targeting PJAK bases.

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