The eleven-hour gun battle took place when police entered the remote town of Mamasapano, held by the Moro Islamic Liberation Front (MILF), around 1900 GMT Saturday without coordinating with the rebels as required under a ceasefire agreement.
Police had been targeting two high-profile terror suspects in the operation.
"This is going to be a big problem," the MILF's chief peace negotiator Mohagher Iqbal told AFP when asked how the fighting would affect the peace process.
Tahirodin Benzar Ampatuan, mayor of Mamasapano, told AFP the bodies of 14 policemen had been removed and at least 16 others had been found.
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Philippine national police chief Leonardo Espina and interior and local government secretary Manuel Roxas flew to Maguindanao on Monday.
In a statement, Espina said the police commandoes were chasing a "high-value target" believed to be behind recent bomb attacks in the south. He did not elaborate.
Malaysian bomb-maker Zulkifli is the most prominent of the 10 to 12 foreign JI members in the Philippines. He went into hiding in the southern region in 2003 and has since been training local militants, according to the military.
Authorities were also allegedly targeting Basit Usman, commander of the BIFF rebel faction that is not part of peace talks.
Ceasefire monitors are investigating the incident, Iqbal said.
The rebels were scheduled to start the long and painful disarming process at the start of this year under the peace treaty.