In a radio interview on Wednesday, Abdullah Macapaar, an MILF field commander blamed for ordering attacks on the two coastal towns on Monday that left at least 34 mostly civilians dead, said his fighters were running out of patience with the government peace process.
"If the government declares an all-out war, we will also declare an all-out war in Mindanao," he said. "We are ready to kill and be killed. The patience of Muslims has run out."
The warning also comes amid fresh fighting on Wednesday between separatist fighters and the military that left one soldier wounded.
Major Armand Rico, a regional military spokesman, said about 30 MILF fighters attacked an army patrol base at Shariff Aguak in Maguindanao province, and the military responded with mortar and howitzer fire.
A lieutenant was wounded, he added.
Macapaar, also known as Bravo, said his group had "nothing to do with" Monday's deadly attacks in Lanao del Norte province.
The MILF leadership had distanced itself from the attacks on the towns and blamed renegade fighters led by Bravo frustrated at delays to finalising a peace agreement with the government.
Bravo and Ameril Umbra Kato, who led the occupation of predominantly Christian villages in the south last week, had a $113,000 arrest bounty placed on them on Wednesday by Ronaldo Puno, the interior secretary.
The MILF has been waging a 30-year guerrilla campaign for a separate Islamic state in the south of the largely-Christian Philippines - a conflict that has killed over 120,000 people.
The separatists signed a ceasefire with the government in 2003 to open the way for peace talks, and both sides said in July they had completed a draft agreement for recognition of MILF's "ancestral domain" in the south.
However, the agreement on the size of a Muslim homeland and a future government's powers, including rights over exploring and developing mineral reserves, oil and gas, was halted amid protests by local Catholic politicians in Mindanao.
The Supreme Court suspended the draft accord, raising new tensions, earlier this month and the situation on the ground has deteriorated rapidly since then.
Hawks on both sides have seized on the stalling of the peace moves to re-ignite fighting that has been mostly dormant since 2003.