Police said he has alleged ties to the Moro Islamic Liberation Front (MILF), a Muslim separatist group with whom the government is trying to revive peace talks.
Uttoh's aide, Mohammed Uttoh Ampatuan, was shot dead after fighters opened fire on troops using rubber boats to storm an island in Laguna lake, about 40km from the capital, police Senior Superintendent Asher Dolina said.
Five fighters escaped, and security forces recovered weapons, homemade bombs and C-4 plastic explosives, according to Dolina and marine spokesman Lieutenant-Colonel Ariel Caculitan.
Dolina said on Friday: "For the past week we have been monitoring this group. This group is composed of former MILF special operations group and we have intelligence reports that this group teaches the Abu Sayyaf in bomb-making."
The MILF has long been suspected of links to the Abu Sayyaf – the al-Qaeda-linked group behind many ransom kidnappings and several deadly attacks.
The MILF denied any ties to the Abu Sayyaf and said it does not have any operations so close to Manila.
The group also expressed scepticism about the latest security operation and said it had never heard of Sanjali Uttoh.
But the security forces were quick to celebrate what they called their "latest victory" in the Philippines' "war on terror".
In Indonesia, the two men arrested, Basri and Adrin, are believed to be the leader and second-in-command of a gang behind 14 cases of violence in Poso, in Central Sulawesi, including the beheadings of three Christian girls in 2005 and assassinations of Christian clergy.
Muhammad Tahir, a Poso police spokesman, said the group had links to Jemaah Islamiyah, a South-East Asian network blamed for attacks including the 2002 Bali bombings that killed more than 200 people.
"They have the mission to make all of Poso Islam," he said.
The region has equal numbers of Muslims and Christians.
More than 2,000 people were killed in three years of sectarian violence between Muslim and Christian communities in the Poso region before a peace accord took effect in late 2001.
There has been sporadic violence since and prosecutions against those involved have been scarce.