Pakistani military sources said the battle erupted close to the Afghan border early on Tuesday when hundreds of paramilitary troops launched an operation against the tribesmen.
The tribesmen aided by foreign fighters are reported to have counter-attacked the Pakistani forces.
Local residents described the scene of fighting some 360km south-west of Islamabad as "very bad".
The Pakistani crackdown on the tribesmen came on the eve of US Secretary of State Colin Powell's two-day visit to Islamabad. The hunt for Usama bin Ladin and al-Qaida members is expected to feature in his talks with President Pervez Musharraf.
Pakistani forces suspect the tribesmen of sheltering al-Qaida forces near Azam Warzak in the South Waziristan tribal district.
Military spokesman Major General Shaukat Sultan said many foreign fighters, including a Chechen, were among the dead.
"If they lay down their arms, we will not hand them over to any other country"
The latest operation comes one day after Musharraf issued an ultimatum to an estimated "500 to 600 foreigners" hiding in the tribal belt along the border to surrender.
"We have given them the option that if they lay down their arms, we will not hand them over to any other country," he told tribal leaders in Pakistan's main north-western city Peshawar on Monday.
Azam Warzak, 20km from the Afghan border and 15km west of South Waziristan's capital Wana, was the scene of the Pakistani army's worst casualty loss in June 2002.
Ten soldiers were killed in a shootout with about 40 suspected al-Qaida members hiding in a local tribesman's home. Most of the rival forces escaped.
The Wana-based intelligence official said troops on Tuesday were pursuing seven tribesmen in particular.
Witnesses reported mortar and artillery fire and said troops had cordoned off the scene of the shootout.
Tribesmen in South Waziristan last week formed a 600-man force to launch their own hunt for scores of fellow tribesmen accused of giving shelter to al-Qaida members.
Tribesmen sympathetic to the Taliban from the region's deeply conservative ethnic Pashtun community are suspected of having offered them shelter after US-led forces invaded Afghanistan in late 2001 to topple the Taliban government.