At least 48 people were killed when suspected Shebab militants from Somalia stormed into a Kenyan coastal town and launched a major assault on a police station, hotels and government offices, officials said on Monday.

Around 50 heavily-armed gunmen drove into the town of Mpeketoni, near the coastal island and popular tourist resort of Lamu, late on Sunday. Witnesses said they first attacked a police station, before starting to randomly shoot at civilians, some of whom had been watching the World Cup in local bars and hotels.

District deputy commissioner Benson Maisori said several buildings in the town -- which is around 100 kilometres (60 miles) from the border with Somalia -- were burned down including hotels, restaurants, banks and government offices.

"There were around 50 attackers, heavily armed in three vehicles, and they were flying the Shebab flag. They were shouting in Somali and shouting 'Allahu Akbar' ('God is Greatest')," he said.

Local resident and witness John Waweru, 28, said he lost two of his brothers to the attackers.

"The attackers came in around 9pm. I heard them shouting in Somali as they fired around. I lost two of my brothers, and I escaped. I ran and locked up myself in a house," he told AFP.

The fierce gun battles continued until after midnight, but by dawn on Monday the town of Mpeketoni was reported calm with security forces saying they were in pursuit of the attackers and authorities recovering the dead.

"The number of bodies taken to the mortuary is 47, while one has died in hospital," a local police officer said, as the Kenyan Red Cross also confirmed 48 people had died.

"Our officers are still combing the area," Kenyan police chief David Kimaiyo told AFP. "It is an atrocity we would not want to see repeated anywhere else."

"We suspect the involvement of Al-Shebab in this attack. We are appealing for calm as we do our best the search for the attackers. It is a very unfortunate incident."

Kenyan troops crossed into southern Somalia in 2011 to fight the Shebab, later joining the now 22,000-strong African Union force battling the Al-Qaeda-linked militants.

The Shebab vowed revenge, carrying out a string of attacks on Kenyan soil, including last September's assault on Nairobi's Westgate mall in which at least 67 people were killed.