Reuters could not independently verify the report and a junta spokesperson did not respond to request for comment.
Pauktaw is about 500km northwest of Myanmar’s main city of Yangon.
The offensive, which the insurgent alliance calls “Operation 1027” after the date it was launched, is the biggest the junta has faced in years.
Three rebel groups, aligned with pro-democracy fighters and a parallel, pro-democracy civilian government, have captured several towns and military posts across the country.
The Irrawaddy news portal, citing a resident of Pauktaw, said members of the Arakan Army (AA) guerrilla group had earlier taken control of the town.
“All the residents are running away. There is no one in the city, all the shops are closed,” the resident said.
Fighting has also broken out in Shan State on the border with China where the insurgents have pledged to wrest control of the area from the junta and eradicate online scam centres run illegally there.
In the weeks before the clashes, Chinese officials called on the junta to take stronger action against the scam centres where Chinese and other foreign nationals have been known to be trapped as victims of human trafficking.
Hundreds of thousands of people have been trafficked to work in scam centres across Southeast Asia in recent years, including at least 120,000 in Myanmar, robbing strangers of their savings online in a fast-growing new kind of crime, the United Nations says.