At least 40 Abu Sayyaf rebels were killed in a clash with government troops on a southern Philippine island that also left six soldiers dead, a marine commander said on Tuesday.
The Abu Sayyaf guerillas were suspected of harbouring two key suspects in the 2002 Bali bombings.
"Soldiers hurled six grenades on about 40 militants, who were taking their breakfast, killing them," Brigadier General Ben Dolorfino said.
"But our men had no idea that they were also surrounded by another band of Abu Sayyaf militants."
Dolorfino said 20 soldiers were wounded in the close-quarter combat with the Al-Qaeda-linked guerrillas that lasted for more than two hours Monday in Patikul town on Jolo island, 1,000 km south of Manila.
Troops were not able to recover the bodies of the guerrillas, the officer said.
The military said the rebels were lead by Abu Sayyaf chieftain Khadaffy Janjalani and included Jemaah Islamiyah (JI) militants Dulmatin and Omar Patek, key suspects in the October 2002 bombings on the Indonesian resort island of Bali, which killed more than 200 people.
Last week, the military said it was dispatching more troops to Jolo to boost the hunt against Janjalani, Dulmatin and Patek, and this week, reinforcement were dispatched to Patikul to pursue the rebels after Monday's clash, when they fled deep into the jungle.
The military has been conducting an offensive against the Abu Sayyaf on Jolo since the start of the month in a bid to flush out Dulmatin and Patek, who are allegedly under the protection of the rebels.
The Abu Sayyaf rebel group has been held responsible for deadly terrorist attacks in the Philippines as well as high-profile kidnappings of foreign nationals.
The US has included the Abu Sayyaf and JI on its blacklist of foreign terrorist organisations because of their alleged links to the Al-Qaeda terrorist network.