The violence, which broke out in Bauchi state on Sunday, spread to Borno, Kano and Yobe states on Monday, with fighters setting fire to churches, a police station and a prison.
Authorities have so far confirmed the death of 55 people in Bauchi and Yobe, but journalists have reported seeing at least 100 dead bodies.
"Over 100 dead bodies have been deposited at the premises of the police headquarters and more are still being brought in," Ibrahim Bala, a local radio journalist, told the AFP news agency.
The fighters belong to a group known as Boko Haram - which means "Western education is sin" in the local Hausa dialect - and have called for a nationwide enforcement of sharia (Islamic law).
Umaru Musa Yar'Adua, Nigeria's president, ordered security forces to go on a maximum state of alert late on Monday.
The president had "ordered national security agencies to take all necessary action to contain and repel the sad and shocking attacks by extremists".
Shettima Mustafa, Nigeria's interior minister, told Al Jazeera that the situation was "getting under control".
"If somebody is forced to leave his home because of violence then the only solution is to control the violence."
He added that the philosophy of Boko Haram did not make sense to him.
"These people are well-educated; they ride jeeps, they watch tv, they talk on mobile phones. But they preach to their followers to not to go to school and this is really surprising and I cannot understand [them]."
Abdulmuni Ibrahim Mohammed, a senior member of the group arrested on Monday, told Reuters: "We do not believe in Western education. It corrupts our
ideas and beliefs. That is why we are standing up to defend our religion".
Boko Haram was founded in 2004, setting up a base dubbed "Afghanistan" in the village of Kanamma in Yobe, close to the border with Niger.
They see that according to sharia, mixing teenage boys and girls in school is a sin, as is holding mixed dancing and singing parties.
Above all they believe that the western education system will result in a Muslim generation that knows nothing about Islam.
The local Daily Trust newspaper quoted Ustaz Mohammed Yusuf, who is purportedly the leader of the group, as saying his followers were ready to die to ensure the institution of a strict Islamic society.
"Democracy and [the] current system of education must be changed, otherwise this war that is yet to start would continue for long," he said.
Sectarian clashes between Muslims and Christians in Bauchi state in February left at least five people dead.
Muslims attacked Christians and set fire to churches in retaliation for the burning of two mosques, which had been blamed on Christians.
Last November, more than 700 people were killed in Jos, the capital of Plateau state, when a political feud over a local election degenerated into bloody confrontation between the two religions.