GROZNY, Russia (AP) _ Russian troops captured a key Chechen rebel position after hand-to-hand fighting, and their artillery and rocket fire relentlessy pounded the heart of Grozny on Saturday.

The Russian army said its troops took the Council of Ministers building, its deepest advance yet into the city center. The building is several hundred yards from the presidential palace, symbolic stronghold of the Chechen battle for independence.

Chechen fighters confirmed that the building had been taken, but said they destroyed eight Russian tanks in the heavy fighting. The rebels staged several counterattacks on the building Saturday, but were repelled, the Russian military command said.

It said the Chechens were mounting ``steadfast resistance'' despite the loss of some key positions in Grozny and heavy casualties, and the rebels brought reinforcements to the southeastern part of the city and its outskirts.

Russia's Independent Television reported a firefight in the presidential palace Saturday after some Russian troops managed to get into the devastated building. But it remained under Chechen control, Russian reports said.

By evening, fighting spread to a downtown area south of the palace, with Russians reportedly capturing several buildings. Other houses located between the palace and the Minutka district, about a mile away, were changing hands in street battles.

Russian artillery fire was concentrated on the center of the Chechen capital, the deep rumble of exploding artillery shells alternating with the pitched whine of Grad rockets.

``They're hitting every inch of the city center,'' said Shamil Basaev, a rebel commander, who was wounded in the fighting.

Moscow sent tens of thousands of troops into Chechnya on Dec. 11 to reassert its control over the mostly Muslim republic of 1.2 million in the Caucasus Mountains.

The ground assault on Grozny began on New Year's Eve, when rebels turned back the better armed Russian soldiers. The city has since turned into a smoking ruin, with corpses and rubble abandoned on the streets.

Russian commanders appeared to be using their massive artillery strength to try to break the Chechen resistance and clear the way for further ground attacks and minimize their own losses.

Russian jets roared over the city on Saturday, firing missiles into buildings as plumes of black smoke towered hundreds of yards into the sky.

Chechen President Dzhokhar Dudayev, who earlier in the week admitted that his forces could not beat the Russian army, appeared on Chechen television Friday night with an urgent appeal for more infantry to ``clear out the city'' of Russian troops, a rebel officer said.

The officer, who did not give his name, was leading a group of about 25 fighters toward the city center, but only five or six of them had guns.

``Freedom or death,'' one young rebel said.

Few people ventured onto Grozny's deadly streets except for Chechen fighters and refugees trying to flee the city. A few scared elderly residents went to wells to draw water in buckets.

The fall of Grozny would be an important victory for Russia and eventually enable it to install some provisional government _ but it would not give it firm control over Chechnya.

The Chechens have vowed to continue the war from the southern mountains, where many guerrillas are now based. Dudayev also has a base in the mountains, according to Russian reports.

The Russian government acknowledged the mood of determination among the Chechen fighters.

``The fighters from the illegal armed formations do not plan to lay down their weapons and are getting ready for further resistance'' in Grozny and elsewhere, it said in a statement.

Rebel forces appeared to be holding the presidential palace, but fighters said it was increasingly difficult to get supplies and reinforcements through to the heavily-damaged building.

The Russian Defense Ministry said there were pockets of resistance at the Interior Ministry and Security Department buildings. Fierce fighting flared around the railway station Saturday.

Thousands of people are believed to have been killed in the war, although casualty estimates vary wildly.

The Russian government says 394 of its troops had been killed, but some observers put the number at about 3,000. A wounded Russian lieutenant, who would only give his name as Dima, said Saturday the army had lost hundreds of men, many more than the rebels.

A Russian parliamentary deputy who spent nearly a month in Grozny told a news conference Saturday that the rebels were ready to start negotiations to end the war.

``Moscow has deliberately blocked the process of negotiation,'' said Valery Borshchyov of the liberal Yabloko party. ``Moscow has a principle idea to destroy the city and exterminate its peaceful population.''