Holding 10 officers hostage on Sunday, Major Antauro Humala and about 160 army reservist supporters are demanding the resignation of Peruvian President Alejandro Toledo.
The rebels seized the station, 900km southeast of the capital Lima, after a major skirmish in which seven people were injured on New Year's Day.
Toledo immediately cut short a beach holiday and summoned ministers and key officials to declare a state of emergency, which restricts citizens' rights and puts the area under the control of the security forces.
Police and army reinforcements have been sent in to restore order swiftly and Toledo told a news conference he was "in command of this operation, and I hope it goes well".
Humala said about 800 police and 600 soldiers were massed and preparing to attack.
"It all looks like it's going to be tonight," he said. But he has vowed to resist until Toledo quits.
Humala, who gained notoriety in 2000 when he joined his brother in a failed uprising against then President Alberto Fujimori, said thousands of locals were backing his movement against a president he accused of "generalised corruption".
"We'll defend ourselves," Humala said. "If they want to risk their lives defending a president like Toledo, that's their problem."
Panamericana Television reported a full power cut in Andahuaylas, raising suspicions that an attack was imminent.
Polls show Toledo's popularity rating is down to just 9% after three and a half years of his five-year term.
Many Peruvians are weary of constant government corruption scandals and believe Toledo has not delivered on promises of more wealth and jobs.