The Tunisian army has launched an offensive against a group of fighters near the Algerian border, where eight Tunisian soldiers were killed earlier this week by suspected "terrorists", AFP news agency says quoting a security source.
The source said the attack took place 16km from Kasserine, near Mount Chaambi, where the eight Tunisian troops were found on Monday with their throats cut after being ambushed by fighters.
"The fighting is in progress, the terrorist group is surrounded," the source, speaking on condition of anonymity, said on Friday.
"Either they give themselves up or they will be killed."
Mosaique FM radio and Nessma television said the clashes were centred near Bir Ouled Nasr Allah, while the authorities maintained their customary silence on military operations.
Monday's deadly attack has prompted Algeria's army to reinforce its presence along the border.
Daho Ould Kablia, Algeria's interior minister, said on Thursday such action was taken because of "the troubles that Tunisia is going through".
Kablia said there had been an "exchange of security information between Algeria and its neighbours to fight the various scourges that threaten the security and stability of the region".
Exchange visits by senior officials from Tunisia, Libya and Algeria have led to closer cross-border cooperation.
Tunisian troops have intensified their hunt for an armed group in the Mount Chaambi area since spring, after several members of the security forces were killed or wounded by explosive devices.
Algiers has said it strongly condemns "the base act of terrorism that resulted in several deaths among the Tunisian armed forces".
Armed groups in Algeria remain active decades after a bloody civil war in the 1990s that killed about 200,000 people, leading some in Tunisia to suggest connections with the group in Mount Chaambi.
Algeria's Foreign Ministry condemned on Thursday what it said were "false allegations" against Algeria from "certain circles in Tunisia".
In a statement, Amar Belani, a ministry spokesman, decried the allegations as a move to "deceive the Tunisian people as they are mobilising to unite against terrorism."
Separately, the defence ministry issued a rare communique in which it said that a heavy machinegun, two rifles, ammunition and a number RPG-7 rockets were found in two 4X4 vehicles on Thursday, near the Libyan border.