The military had launched an offensive against rebels from Abu Sayyaf, a small group linked to al-Qaida, and renegades from the Moro National Liberation Front (MNLF), said army spokesman Lieutenant-Colonel Buenaventura Pascual on Wednesday.
He added that hundreds of extra troops had been rushed to the island, bringing the total military presence to 3000 soliders with three marine and three army battalions deployed.
Both groups have strongholds in the mountains and jungles of Jolo. The MNLF signed a peace deal in 1996, but some disgruntled members joined Abu Sayyaf and were involved in several cross-border captures in 2000.
"Since Monday, we have lost 20 soldiers, but we killed about 40 rebels in our punitive actions," Pascual said. More than 30 soldiers were wounded, he added.
The violence erupted on Monday when hundreds of rebels ambushed a convoy of soldiers in Patikul town. They also staged attacks in three other areas of Jolo. About 500 civilians have been displaced and were being evacuated by the Red Cross.
Gun battles have raged between
rebels and government troops
The Moro Islamic Liberation Front (MILF), which is due to restart peace talks with the government in March after breaking away from the MNLF in 1978, said its members were not involved in the clashes in Jolo.
"We remain committed to a peaceful solution," said Eid Kabalu, a spokesman for the MILF, the largest Islamist rebel group in the mainly Roman Catholic country.
The clashes in Jolo are unlikely to affect talks between the government and the larger MILF, set for next month in Kuala Lumpur, although security analysts see the potential for some MILF members to break away as a peace deal draws nearer.
Abandon peace talks
Kabalu said the MILF, mainly based on Mindanao island, had a minimal presence on Jolo. He said it was ignoring calls from other rebel groups to abandon the peace talks and continue fighting for an Islamic state in the southern Philippines.
"We respect their position. We have our own strategy to deal with the government," Kabalu said.
"No amount of development can pay for our homeland's illegal and immoral occupation or annexation"
Abu Solaiman, an Abu Sayyaf leader
On Tuesday, Abu Sulaiman, an Abu Sayyaf leader, called on the MILF to drop the peace talks being negotiated by Malaysia.
"To our brothers in the MILF, don't waive our nation's honour, dignity and right," Solaiman said in a radio interview.
"No amount of development can pay for our homeland's illegal and immoral occupation or annexation," he added.
Army spokesman Pascual said six more planes and helicopters were deployed to Jolo to provide air support for the soldiers.
Army howitzers started shelling rebel positions on Wednesday morning as 3000 troops staged ground assaults. Helicopters fired rockets and OV-10 planes dropped 227kg bombs on bunkers, he said.
Abu Sayyaf, estimated to have about 500 fighters, was best known for capturing foreigners and Filipinos for ransom, until it killed at least 100 people with a bomb on a passenger ferry, at the mouth of Manila Bay in February 2004.
The army said the MNLF renegades had joined forces with Abu Sayyaf to put pressure on Manila to transfer the detention of rebel leader Nur Misuari to the southern province of Sulu.
At least 20 soldiers have been
killed in the three days of clashes
Misuari, a political science professor at a state university, started the MNLF in 1968.
He was elected governor of a semi-autonomous Muslim region after a 1996 peace agreement, negotiated by Indonesia, but staged a rebellion in 2001 after the government refused to support his re-election.
Misuari tried to escape to Malaysia, but was deported to the Philippines in January 2002. He is detained at a police camp south of Manila and stands trial on rebellion charges.