A former military commander in Papua New Guinea on Thursday claimed to have seized control of the country's armed forces and demanded that ousted prime minister Michael Somare be reinstated.

The dramatic move appeared to be connected with a power struggle between Somare and sitting premier Peter O'Neill over leadership of the resource-rich but impoverished country, which has been struggling to throw off its reputation as a politically dysfunctional and often lawless nation.

Ex-colonel Yaura Sasa held a news conference at military headquarters in the capital Port Moresby to declare himself leader of the PNG Defence Force following media reports of a "mutiny" at the city's Taurama barracks.

"My task is restoring the integrity and respect of the constitution and the judiciary," Sasa told reporters at the commander's office.

"I am now calling on the head of state to immediately implement the Supreme Court decision relating to Sir Michael Somare's position as the prime minister."

Sasa demanded O'Neill recall parliament and set a seven-day deadline for MPs to reinstate Somare as leader.

"If this call is not heeded I may be forced to take necessary actions to protect and uphold the integrity of the constitution," he said, declining to provide further details.

Somare's camp confirmed Sasa was acting in their interests.

"I can confirm that Sir Michael and his cabinet appointed the new PNGDF commander," Somare's spokeswoman told AFP.

O'Neill's deputy Belden Namah said 15 of the 30 officers involved in the incident had been arrested and urged Sasa to give himself up, warning that he faced the death penalty for treason.

Namah also condemned Somare for using "rogue soldiers to pursue his own greed and selfishness."

Somare, 75, was removed from office while out of the country recovering from illness last year only to later be declared the rightful leader by the Pacific nation's Supreme Court, throwing PNG into political turmoil.

O'Neill eventually resumed the prime ministership after Governor General Michael Ogio rowed back on his reappointment of Somare.

At the height of the crisis PNG had two prime ministers, two governors-general, two cabinets and two police chiefs, though O'Neill commands majority support among MPs and the public service.

Somare has consistently refused to recognise O'Neill's leadership, storming into the nation's parliament as recently as last week with the Supreme Court's order to demand his reinstatement.

Known as the "Grand Chief", Somare led PNG for almost half of its 36 years since independence.

Sasa, formerly defence attache to Indonesia, denied his actions were a "military coup," describing them as the "normal process of replacement of commander by the government."

"I assure the international community, our investors, this is not a military coup. I am intervening to uphold the constitution and I have my intentions made known and that the two parties comply with this promptly."

National carrier Air Niugini suspended a number of domestic routes "indefinitely" due to the tensions.

Australia's foreign office confirmed "disturbances" at Port Moresby's military barracks but said the overall situation in Port Moresby was "calm, with business as usual."

Prime Minister Julia Gillard called for restraint.

"It is critical that this situation be resolved peacefully as soon as possible, with the PNG defence force chain of command restored," Gillard said.

"The military has no place in PNG politics."

Papua New Guinea is heavily reliant on Australian aid and Australia -- for many years before independence its de facto administrator on behalf of the British government -- is also PNG's major trade partner.

Canberra earlier confirmed that O'Neill was the nation's recognised leader.

Sasa said he had met the man he deposed, Francis Agwi, and served him with documents from the government rescinding his appointment, denying that he was under house arrest.

But PNGDF chief of staff Captain Tom Ur told Radio New Zealand Agwi remained in charge and Sasa only had a small band of supporters.

"We have only one commander. If we don't see any legal instruments and all that, we are not taking orders from renegade soldiers," said Ur.