Elsewhere in the south, Taliban are trying to capture Kandahar, their former stronghold, and clashes have also intensified in Herat in the west.
Fighting has been continuing in Lashkar Gah for days, with the militants now reportedly in control of most districts.
“We are going through difficult days,” a student in the city told the BBC. “The Taliban set fire to the ground and government air forces to the skies.”
Another man said on Sunday: “The Taliban can be seen on the city’s roads. The presence of the Taliban has astonished people here.
“Shops are closed, and government military vehicles are lying destroyed in the middle of the road. The war continues within a few metres of the governor’s office and the National Security Directorate.
“The central government said recently they had deployed new commandos to Lashkar Gah, but we didn’t see them.”
Hundreds of Afghan reinforcements have since reportedly been deployed to the city.
At the weekend, Attaullah Afghan, the head of Helmand provincial council, admitted that fighting seemed to be “getting out of our control”.
The Taliban have made further advances this week, despite Afghan and US warplanes targeting the insurgents.
There are reports that Taliban fighters have taken positions inside homes, shops and the bazaar – people are trapped in their homes while fighting goes on in the streets.
The militants generally warn people via loudspeaker to leave but sometimes they enter houses – locals have just minutes to flee or risk being caught in crossfire as their homes become part of the battlefield.
“The Taliban told us if we didn’t leave the house in half an hour, we would be counted among the police and Afghan forces,” said the student the BBC Afghan service spoke to.
During their rule in the late 1990s, the Taliban publicly executed people and restricted women’s access to education and employment.
The Taliban say they have changed and would no longer resort to such violence – but many Afghans are sceptical.
Human Rights Watch has documented cases of reprisal attacks by the militants against civilians deemed to have supported the government.
The UN says civilians are bearing the brunt of the conflict and is urging all parties to do more to protect civilians or the impact will be catastrophic.
The thousands who’ve escaped the fighting now face a lack of food, drinking water and medicines.
Aid agencies do not have access to most of the displaced, and health centres and hospitals don’t have capacity to deal with the number of casualties. Some health facilities have been destroyed, while others are inactive.
A doctor in Lashkar Gah, Masood Khan, said an ever-increasing flow of severely wounded patients was arriving at his hospital, and he feared that others were unable to reach it. He said medical supplies were running low.
“We are receiving a lot of war wounded… There is fighting all around,” Dr Kahn, an intensive care specialist at a hospital run by the health charity MSF, told the BBC on Monday.
Videos of reported Taliban atrocities are being shared on social media, deepening fears of their possible return.
The United States and Britain say the group may have committed war crimes, accusing them of massacring dozens of civilians in revenge killings in Spin Boldak, on the border with Pakistan.
There are also reports that at least 40 Hazaras of the Shia Muslim minority were targeted and killed in Malistan in eastern Ghazni province.
The Taliban have dismissed the accusations as baseless, and are posting their own grisly images of civilian casualties in Afghan and US air strikes.
Those trapped in the worsening fighting have few options.
“We have neither bread nor water in the house, and the electricity is completely cut off,” a local businessman in Laskhar Gah told the BBC.
“I do not know where to go, there are clashes in every corner of the city.”
An Afghan interpreter living in the city said his life was under threat from the Taliban because he had worked for the British forces.
“I have changed address three times. My own house has been captured by the Taliban and they are living there and they were asking for me,” he said.
“We don’t know what will happen in the future but they are looking from house to house to find the people who worked for Nato.”