The clash erupted in the Sulu town of Talipao, a stronghold of the Abu Sayyaf which still holds American Jeffrey Schilling and Filipino Roland Ullah captive, according to Col. Fredesvindo Covarrubias, chief of the Armed Forces’ Civil Relations Group for Mindanao.
He said there were no casualties on the government side.
"Troops are hot on the (rebels’) trail. Government forces were pursuing the rebels in the mountains," Covarrubias said. "This is a continuing military offensive and search and rescue operation to free the hostages."
Schilling and Ullah are the last of the Abu Sayyaf’s hostages from a kidnapping spree last year which victimized mostly European tourists as well as local and foreign journalists. The others were freed either after ransoms were paid or during a government offensive.
Covarrubias, meanwhile, belied reports that Indonesian troops have clashed with the extremist rebels.
"I was not even interviewed nor have given such information which did not exist at all," he said.
Last week, the Arroyo government rejected demands by the Abu Sayyaf to resume negotiations for Schilling, a 24-year-old Oakland, California native seized last August whose health they said has deteriorated.
There has been no word on Ullah, a dive master who was among the kidnappers’ first batch of victims in April last year, taken from the Malaysian resort of Sipadan.
The military said both are still believed to be held in Sulu’s vast jungle.
Some 500 soldiers are involved in the assault on the Abu Sayyaf in Sulu and military officials have appealed for reinforcements, saying the kidnappers are still well-entrenched in the tough jungle terrain.
In another development, sporadic clashes between military and Moro Islamic Liberation Front (MILF) forces continued in Pikit, North Cotabato. Two rebels have been killed.
The new administration has laid out plans to resume peace talks with the separatist Moro group.  Roel Pareño