Witnesses told of how government troops went door to door in opposition strongholds in the capital Bujumbura, dragging out young men and executing them.
They buried the corpses in mass graves to 'prevent the spread of disease' although some locals said the army was trying to hide evidence of the massacre.
Unrest and Massacre in Burundi Capital, 87 Killed, Corpses in the Street
Army spokesman Colonel Gaspard Baratuza said 79 'enemies' and eight soldiers had died, 45 rebels were arrested and 97 weapons were seized.
He added: 'Fighting continued into the night and the corpses found in these neighborhoods this morning are enemies.'
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Massacre in Burundi
Locals in Bujumbura awoke this morning to find at least 39 dead bodies scattered around the neighborhood.
Some witnesses, who accused the government of extrajudicial killings, told of how officers broke down doors looking for young men and shot them at close range.
A witness in Nyakabiga, a hotspot of antigovernment protests in recent months, said 'kids' were shot 'execution style through the top of the skull'.
Another local who lives near an army college that was attacked yesterday saw dozens of corpses on the street where he lives.
"The man, who blamed 'soldiers and police' for the killings, said: 'I have counted 14 dead bodies with my own eyes.'"
Government supporters are said to be celebrating what they called 'the victory of our valiant army over the enemy' by holding marches in the capital today.
The fighting was the worst outbreak of violence since a failed coup in May, after President Pierre Nkurunziza launched his bid for a third term.
UN chief Ban Ki-moon said the attacks risked 'a further destabilization of the situation' and urged all sides to hold back, his spokesman said.
Attacks targeting the security forces have escalated, with rebels armed with assault rifles, rocket-propelled grenades and mortars attacking police convoys and targeting government installations.
"UN figures released before Friday's violence showed at least 240 people had been killed and more than 200,000 had fled abroad since May, raising fears of a return to civil war, a decade after the end of a 1993-2006 conflict between rebels from the Hutu majority and an army dominated by minority Tutsis."
Some 300,000 people were killed in the war, which began a year before a genocide of mostly Tutsis in neighbouring Rwanda.
The Security Council said that sending UN peacekeepers to the nation remained an option, and stressed the need for urgent political dialogue.