Five rebels from the Moro National Liberation Front (MNLF) and a 71-year-old woman have been killed as fighting dragged on in a southern Philippine city between government troops and the rebel armed group holding out with about 20 civilian hostages, officials said.

Military spokesman lieutenant colonel Ramon Zagala said five rebels were killed and two soldiers were wounded on Saturday, as troops battled rebels from close range in the city of Zamboanga. He said 35 rebels were still holding out.

Troops are searching two neighbourhoods for MNLF rebels who seized scores of civilians as human shields on September 9 when government forces repulsed their bid to occupy the city.

"We expect that at the soonest possible time we can corner them," Zagala said, adding that troops had recovered a lot of ground from the rebels. He did not elaborate.

He said the military had stopped using heavy weapons during the battles to avoid hitting the hostages.

The military operations have rescued more than 170 hostages, and killed or captured more than 200 rebels. Fifteen security forces and nine civilians have also died.

It is the most serious fighting in years between rebels and government forces in the predominantly Roman Catholic nation's south, the scene of a decades-old struggle for self-rule by minority Muslims.

The MNLF entered the key trading centre of Zamboanga in a bid to derail peace talks with a rival group.

The rebel faction involved in the fighting dropped its demand for a separate Muslim state and signed an autonomy deal with the government in 1996, but the rebels did not lay down their arms and later accused the government of reneging on a promise to develop long-neglected Muslim regions.

Since its onset, the conflict has led to approximately 118,000 refugees being displaced.

Source: Agencies