There was no word on whether the hostages were hurt in the fighting, but they remained in the grip of the Abu Sayyaf militants, police said.
Rebel commander Khabir Malik of the Moro National Liberation Front, which has an autonomy deal with the government, said his group decided to attack the Abu Sayyaf in the rugged mountains of Patikul town in southern Sulu province after negotiations collapsed on the release of several of its foreign hostages, including a Jordanian TV journalist and two European men who have been held since last year.
Abu Sayyaf militants did release two Filipino hostages over the weekend after an unspecified ransom was paid, security officials said, adding the captives were let loose on their own and not turned over to the Moro rebels.
"We had no choice," Malik told The Associated Press by telephone from Patikul. "They told us they won't hand over their hostages to us even if they die."
The Moro rebels battled the Abu Sayyaf with guns and knives at close range Sunday, Malik said, adding his group lost eight men, including one who was beheaded and a few others who were hacked to death.
Military and police officials in Sulu said up to 14 Abu Sayyaf men were killed, citing intelligence.
The fighting subsided Monday after Abu Sayyaf gunmen split into smaller groups, with a large group seen fleeing from Patikul to an adjacent town. But the clashes could erupt again, Sulu provincial police chief Senior Superintendent Antonio Freyra said.
It was the first major bloody confrontation between the two insurgent groups, which have coexisted for years and at times were suspected of collaborating on kidnappings and backing each other in clashes against government troops in predominantly Muslim Sulu.
Malik said his group had taken the initiative to seek the freedom of the hostages to help the government clean up the image of Sulu, where the Abu Sayyaf has carried out deadly bombings, kidnappings and beheadings, primarily in the early 2000s.
The two Filipinos freed by the Abu Sayyaf, cameraman Ramel Vela and audio technician Roland Letriro, worked for veteran Jordanian journalist Baker Abdulla Atyani. The rebels were also holding two European bird watchers, a Japanese treasure hunter, a Malaysian man and at least one Filipino resident of Sulu, police said.
Vela said he and Letriro last saw Atyani five days after they were taken into Abu Sayyaf custody in June last year, when the militants separated him from them. Atyani wanted to interview the militants in Sulu but he and his Filipino crewmen were taken hostage, Vela said.
Vela recounted his ordeal in a news conference in Manila, saying he saw about 400 Abu Sayyaf fighters in different Sulu jungle encampments, where they were held. He added that they were treated well.
"We were not harmed, not a pinch," he said from a wheelchair, where he sat with a swollen leg from constant jungle treks.
Atyani has gained prominence for having interviewed Osama bin Laden and his aides in Afghanistan about three months before the Sept. 11, 2001, attacks.
The Abu Sayyaf is an extremist offshoot of a Muslim rebellion that has been raging in the predominantly Catholic nation's south for decades. U.S.-backed military offensives have crippled it in recent years, but it remains a national security threat. Washington has listed the group, which has about 380 armed fighters, as a terrorist organization.
Moro National Liberation Front rebels signed a peace deal with the government in 1996 that did not require them to disarm. They have settled back to their Sulu communities but have clashed with government troops periodically while negotiating for more concessions.
The group's stature has been overshadowed in recent years by the larger Moro Islamic Liberation Front, which is currently engaged in Malaysian-brokered talks with the government to expand and seek more power and resources for an existing Muslim autonomous region in the south.