BEIRUT, July 20 (Reuters) - Many of the 32,000 Palestinian refugees who have fled fighting between the Lebanese army and Islamist militants will need temporary homes while their devastated camp is rebuilt, a U.N. official said on Friday.

Richard Cook, director of the U.N. Relief and Works Agency (UNWRA) in Lebanon, said he could not estimate reconstruction costs until fighting had stopped and damage had been assessed.

"We are looking at a substantial reconstruction effort... It will certainly run into hundreds of millions of dollars," Cook said in an interview, adding that Germany, Italy and other donors had expressed willingness to provide some of the money.

At least 235 people have been killed at the Nahr al-Bared camp in north Lebanon, where troops have been trying for two months to crush Fatah al-Islam, a group of Palestinian, Lebanese and foreign Arab fighters driven by al Qaeda's ideology.

Sporadic blasts and gunfire echoed from the camp on Friday. Cook said UNRWA staff had not had access for weeks, but the army had reported heavy damage from shelling in the last few days.

Troops have only recently penetrated the official camp perimeter after battling for weeks to evict Fatah al-Islam from a nearby spillover area where many refugees had lived.

Army firepower and boobytraps set by militants have laid waste to Nahr al-Bared's warren of cinderblock buildings on the Mediterranean coast just north of the port city of Tripoli.

UNWRA, which takes care of Palestinian refugees in Lebanon, Jordan, Syria, the occupied West Bank and the Gaza Strip, has agreed with the Lebanese government to undertake the rebuilding of Nahr al-Bared within its original perimeter.

The agency's own schools, clinics and other installations have been heavily damaged in the conflict.

BATTLE ZONE DANGERS

UNRWA and its aid partners are discouraging refugees from rushing back as soon as the shooting stops. They want time to clear unexploded munitions, unsafe buildings and rubble.

"We anticipate that substantial numbers of those 32,000 will have to be temporarily accommodated elsewhere," Cook said.

Many of those displaced from Nahr al-Bared are now crammed into schools, mosques and homes in the nearby Beddawi camp.

Saudi Arabia has given $10 million for immediate cash handouts to displaced families and their refugee hosts.

UNRWA is looking for alternatives such as rented accommodation, temporary housing or buildings that could be converted or rehabilitated for use as living quarters.

Anger is rife among those displaced from Nahr al-Bared -- a protest march towards the camp on June 29 ended in bloodshed when troops fired on the refugees, killing two and wounding 50.

Cook said the emergency had forced UNRWA to divert some resources from projects designed to improve living conditions in Lebanon's 12 refugee camps, which house some 200,000 people.

The agency has won pledges totalling $24 million for projects worth $49 million, in addition to $4 million spent on reconstruction in the camps after last year's war between Israel and Lebanese Hezbollah guerrillas.

"Camp improvements are now even more important because the people's conditions create a frustrated, angry community that is more vulnerable to extremism," Cook said.

Palestinian refugees in Lebanon have long suffered severe restrictions of their rights to employment or to rent or own property outside the camps. Prime Minister Fouad Siniora's government had begun to ease some of those constraints.