The Philippine government has rejected an appeal by Islamic nations for a ceasefire and is instead offering a bounty for the capture of Habier Malik, a man they say is leading a splinter faction of the MNLF.
Government officials say the peace accord with the MNLF remains in place and that troops are only fighting Malik's break-away group.
They say they believe Malik's faction has close ties with the Abu Sayyaf - a group labelled a terrorist organisation by the US and said to have links with al-Qaida.
Last week Malik's group was blamed for mortar attacks on two marine camps and houses on Jolo island.
That attack has since sparked an increasingly fierce round of tit-for-tat fighting with the military now offering a $21,000 reward for information leading to Malik's capture.
Since the original 1996 ceasefire the military has integrated hundreds of former MNLF fighters into specially formed divisions working alongside government troops.
But the original MNLF has split into many different factions and, while its main leader, Nur Misuari, is in government custody, some 500 MNLF members are on the run.
Many of them are said to be frustrated, saying that the implementation of the peace pact has been ineffective and development that was promised at the time has not come – sentiments shared my many in Muslim-majority Mindanao.
Amina Rasul of the Philippine Council for Islam and Democracy, told Al Jazeera that more than 10 years after the peace accord the region remained a "basket-case" of the Philippines.
"Now where are we?" she said. "We have very little access to public services, we are poorest of the poor."
Rather than the development that was promised, she says, the region has instead slipped backwards with the country's highest illiteracy rates and highest incidence of conflict.