About 300 armed followers of jailed Muslim leader Nur Misuari on Friday fled toward a mountainous region off Panamao town, on southern Jolo island, officials said.
At least 24 soldiers have been killed, including Lieutenant Colonol Dennis Villanueva, head of the army's 53rd Infantry Battalion, and two of his enlisted men, who came under mortar fire on Thursday while battling the separatists in Panamao.
More than 40 other soldiers were wounded in the clashes that erupted on Monday. The military said troops have killed 37 Misuari loyalists.
After air force fighter planes bombarded the separatists near the army company detachment, a nearby hospital and Panamao's town hall on Thursday, large numbers of troops moved in, firing artillery and automatic rifles and prompting the attackers to withdraw, officials said.
Attack helicopters targeted
separatists from the air
They fled to a hilltop stronghold called Bitan-ag, then retreated deeper into Jolo's mountainous heartland. Army troops and marines captured Bitan-ag and were chasing the separatists, said army Brigadier General Agustin Demaala.
Lieutenant General Alberto Braganza, commander of the military's Southern Command, said troops would not ease their pursuit of the separatists, who were led by local religious leader Habier Malik, until they surrender or are dead.
"He is now in imminent defeat, and our troops are finally closing in on him," Braganza said from Jolo, where he was overseeing assaults against the armed men.
Misuari's followers said they were responding to alleged intrusions into their territory on 1 February when the army was pursuing suspected Abu Sayyaf followers in the area. A child and its parents were killed in crossfire as soldiers chased suspected insurgents.
Nearly 3000 army troops and marines, including hundreds who were brought by ship from nearby regions, were deployed in Panamao and outlying towns, where the rebels attacked government forces.
The military suffered its single-biggest loss in the mountainous coastal town of Patikul, where 17 reinforcement marines were killed and 13 others injured in an ambush on Monday.
"He is now in imminent defeat, and our troops are finally closing in on him"
Lt Gen Alberto Braganza,
commander, Philippine military Southern Command
Jolo Governor Ben Loong said thousands of villagers have fled their homes in Panamao and outlying towns and gone to emergency shelters.
The fighting underscores the fragility of peace in the volatile south - the home of minority Muslims and site of a decades-long separatist insurgency.
Misuari formerly headed the Moro National Liberation Front, a large Muslim separatist group that accepted limited autonomy and signed a peace accord with the government in 1996.
But violence flared again years later and Misuari was imprisoned near Manila on charges of rebellion. Many of his armed followers still maintain strongholds in Jolo and have been accused of supporting the al-Qaida-linked Abu Sayyaf.