The attackers gunned down an innocent villager and burned down eight houses of poor Muslim farmers at the boundary of Barangays Cadiis and Tampad.
Cotabato City Mayor Muslimin Sema, the MNLFs secretary-general, said the attack forced dozens of villagers to flee their homes.
He said the village is supposed to be covered by the Sept. 2, 1996 government-MNLF peace agreement and the incident "sent bad signals" to other MNLF communities in Central Mindanao.
"It must be investigated right away by competent authorities," he said.
Local officials said the hostilities first started when Carmen policemen and civilian volunteers, reportedly running after suspects in the murder of a local village chief, "accidentally" clashed with MNLF forces at the Cadiis-Tampad boundary.
The Armys 602nd Infantry Brigade, which has jurisdiction over Carmen and surrounding towns, confirmed that a policeman was wounded in the firefight.
Local MNLF leaders blamed the "mis-encounter" on the failure of the police to coordinate with them.
MNLF leaders in Barangays Cadiis and Tampad, police and military intelligence sources said, are at odds with municipal officials.
The hostilities worsened when after the incident, a group of suspected partisans, some of them identified with rivals of the MNLF commander in the area, Andes Aliuden, arrived at the scene and strafed houses with automatic weapons and 40-mm shoulder-fired grenade projectiles.
Although outnumbered, Aliuden and his followers shot it out with the attackers, leaving a villager dead and three others slightly wounded.
The attackers also torched a vehicle and eight houses in the MNLF community.
The firefight waned only when the gunmen retreated after sensing that soldiers from the 602nd Infantry Brigade had started arriving.
A company-sized Army peacekeeping contingent is now deployed in the area to prevent a repeat of Wednesdays hostilities. John Unson