At least 14 people, including two security personnel, were killed when armed followers of a Filipino Sultan clashed with the Malaysian security forces as tension mounted in their nearly 20-day standoff.
Sabah police commissioner Hamza Taib said 12 Filipino clansmen of Sulatn Jamalul Kiram III were killed in the clash with Malaysian forces in Sabah province.
"The operation is still going on," he said, adding that police continued to surround the area where about 100 people were left.
The number of injured is not known.
Malaysian Prime Minister Najib Razak confirmed that the two security personnel were killed and three others injured during the clash between Malaysian armed forces and Sulu gunmen in Tanduo village near Lahad Datu in Sabah.
The armed Filipino group had ventured 1.5 km from their holed up area and opened fire at the Malaysian security forces, Najib said adding Malaysia had wanted to prevent the bloodshed.
"I have given the full mandate to the ground commanders, namely the Inspector-General of Police Ismail Omar and the Armed Forces Chief Zulkefli Mohd Zin to take action deemed necessary," he said.
A group of about 200 followers of the Sultanate of Sulu from the southern Philippines entered the coastal village of Lahad Datu in Sabah on Borneo island on February 9 to claim the territory as their own, citing ownership documents from the late 1800s.
The group is asking Malaysia to renegotiate the original terms of a lease on Sabah by the Sultanate to a British trading company in the 19th century.
Both the Philippines and Malaysian authorities told the group to leave the area but the clan refused, leading to today's standoff.
The clan led by Raja Muda Agbimuddin Kiram, a brother of the self-proclaimed sultan, has occupied the tiny village and refused to go back.
News reports from Manila said Kiram had told Philippine radio station DZBB earlier today that Malaysian police had surrounded the village and opened fire suddenly.
On Tuesday, Philippines President Benigno Aquino urged Kiram's elder brother in the southern Philippine province of Sulu, Sultan Jamalul Kiram III, to tell his supporters to return.
Jamalul Kiram III, 74, says he is heir to the Islamic Sultanate of Sulu, which once controlled parts of Borneo, as well as southern Philippine islands.
