Italian priest Giuseppe Pierantoni "is still very much alive" and held by a small group of Muslim gunmen called the "Pentagon" somewhere in Mindanao, Moro Islamic Liberation Front (MILF) spokesman Eid Kabalu said.
"We are trying to help, but we are in the forefront (of rescue operations). We are doing our own initiative to make sure that nothing untoward happens to this priest," Kabalu told dzBB radio in Manila.
The MILF was also willing to have a "formal alliance" with police in conducting rescue operations, Kabalu said, but stressed this required a request from the governments peace panel.
Pierantoni was seized in October in his rectory in southern Zamboanga del Sur province by the Pentagon gang, which the military says is mostly made up of former Muslim separatist rebels.
Another Muslim kidnap gang, the Abu Sayyaf, is holding hostage an American missionary couple and a Filipina nurse in the island of Basilan.
The 12,500-strong MILF has been waging a rebellion for an independent Islamic state in the south since 1978. It has entered into peace talks with Manila and in August signed a cease-fire.
Kabalu said the MILF leadership was optimistic about the peace initiatives by the government of President Gloria Arroyo, adding that the next round of talks would likely resume this month.
In another development, a band of 70 suspected MILF rebels raided the other day a farming village in Shariff Aguak town in Maguindanao and torched three houses after their owners allegedly refused to pay "revolutionary taxes."
The attack forced some 600 families to evacuate to safer grounds, the Armys 6th Infantry Division reported.
Spokesman Maj. Julieto Ando said the MILF raiders wore military combat fatigues with MILF insignias.
Witnesses have identified three of the gunmen as Sami Gambal and brothers Odin and Maki Dumpao, who belong to the MILFs so-called 207th Brigade and have long been wanted for a series of crimes, including armed robbery and extortion.
Army Capt. Noel Detoyato said responding troopers, backed by armored vehicles, responded to the interior Barangay Nabundas in Shariff Aguak and engaged the MILF rebels in a heavy exchange of fire.
Two MG520 attack helicopters provided air cover for the ground troops, who drove away the rebels about five hours later. John Unson, Roel Pareño