(REUTERS) - United Nations Secretary General Ban Ki Moon says the Yarmouk refugee camp is now "the deepest circle of hell" in Syria's four year war and demanded an end to fighting immediately.

Speaking to reporters at the United Nations on Thursday, Mr Ban described the refugee camp as "a death camp".

After more than two years under siege, the 18,000 Palestine refugees and Syrians in the camp are being being held hostage by Islamic State and other extremist militants, Mr Ban said.

"The residents of Yarmouk - including 3,500 children -- are being turned into human shields. They face a double-edged sword - armed elements inside the camp, and government forces outside. We are now hearing worrying reports of a massive assault on the camp and all civilians in it. This would be yet one more outrageous war crime for which those responsible must be held accountable," he said.

The war-battered Yarmouk camp on the outskirts of Damascus was almost entirely seized by ISIS, which rules swathes of Syria and Iraq, in recent days. The radical Islamist group brushed aside local militia opposed to Syrian President Bashar al-Assad.

The sprawling Yarmouk was home to some 160,000 Palestinians before the Syrian conflict began in 2011 - refugees from the 1948 war of Israel's founding, and their descendants.

The Syrian Observatory for Human Rights, which monitors the conflict from Britain, said that Islamic State controlled 90 per cent of the camp after defeating fighters mainly from Aknaf Beit al-Maqdis - a Syrian and Palestinian militia opposed to Assad.

Islamic State, the most powerful insurgent group in Syria, is now only a few kilometers from Assad's seat of power.