Fighting erupted shortly before noon when police and military forces were alerted by reports that Abu Sayyaf gunmen who attacked Basilans capital of Isabela last Thursday had holed up in Balatanay village, about seven kilometers to the west and bordering the town of Lantawan.
Responding government forces were met with gunfire from the rebels, triggering intense fighting.
The rebels were quickly reinforced by their comrades, as the fighting spread to the town of Lantawan.
Col. Hermogenes Esperon, commander of a military task force in Basilan, described the fighting as "fierce" and that intercepted radio communications from the rebels indicated they suffered heavy casualties.
Lt. Gen. Roy Cimatu, chief of the militarys Southern Command, told Manila reporters in a telephone interview that two OV-10 attack planes and two MG-520 attack helicopters were dispatched to pound rebel positions.
He said 15 rebels were killed, while 10 soldiers were wounded. Several rebel firearms were also recovered.
"Those are the figures we have received from the field and are subject to verification," Cimatu said.
He said the rebel unit was believed to be under the command of Khadaffy Janjalani, the elusive Abu Sayyaf chief holding two American and 16 Filipino hostages in Basilans jungles.
Police said the Abu Sayyaf members encountered in Balantay were the same rebels who attacked Isabela Thursday night with rounds of mortar fire. Three civilians were injured in the blasts and a soldier was wounded in ensuing gunfire.
Officials said the Thursday attack was launched to divert military attention from another Abu Sayyaf unit holding the hostages.
About 5,000 soldiers have been dispatched to Basilan to rescue the captives and crush the rebels, a small group of Islamic fighters believed to have links with Saudi dissident Osama bin Laden.
"There are no sightings of the hostages but we believe they were the rebel force because (they) could not leave the area. We got them cornered," Cimatu said.
Military officials, meanwhile, said US Embassy staffers were scheduled to arrive here later yesterday to retrieve skeletal remains recovered by soldiers last week for identification.
The remains are believed to belong to Guillermo Sobero, one of the three American hostages whom the Abu Sayyaf claimed to have executed as an "Independence Day" gift to the Arroyo government in June.
The bones were recovered in a shallow grave in a Basilan forest after a captured rebel who claimed to have taken part in the execution led troops to the area. The pile of bones were without a skull, apparently confirming rebel claims that Sobero had been beheaded.
Military officials said DNA testing on the bones was to be carried out to determine whether they belonged to Sobero.
Officials earlier said relatives of Sobero were to accompany the embassy staff, but later corrected the report.
National Security Adviser Roilo Golez cautioned against coming to hasty conclusions, saying the remains were still "subject to verification." Roel Pareño