Troops stormed an Abu Sayyaf lair near the town of Maimbung on Tuesday, triggering a gunbattle with about 20 rebels, local army task force chief Colonel Alexander Yapching said on Wednesday.
At least three gunmen were killed and an undetermined number of others wounded, the official added.
The fighters were believed to be under the command of senior Abu Sayyaf leader Galib Andang, alias Commander Robot, who was behind the kidnapping of a group of mostly European tourists from neighbouring Malaysian resorts in 2000.
All the hostages were released in batches over several months, allegedly in exchange for huge ransoms.
Military spokesman Lieutenant Colonel Daniel Lucero has said
government offensive against Abu Sayyaf rebels has been intensified in Jolo, their stronghold.
The US and Philippine governments have branded the Abu Sayyaf a "terrorist" organisation for alleged links with Usama bin Ladin's al-Qaida network.
The fighters are blamed for a series of bombings and attacks in the south in recent years as well as the murders of two US citizens kidnapped in 2001.
A small group of US troops are in the south,training and equipping the Filipino military against Abu Sayyaf fighters.