Manila  - Two Muslim rebels were killed Wednesday in a clash with government troops on a western Philippine island that the guerrillas had occupied since the weekend, the military said.

Two rebels were also arrested in the assault on Montangule Island off Palawan province, 600 kilometres south-west of Manila, said Lieutenant Colonel Edgard Arevalo, a navy spokesman.

Arevalo said the Moro National Liberation Front (MNLF) rebels had occupied Montangule since Saturday, forcing more than 1,000 residents to flee their homes.

"Navy ships are now patrolling the seas to pre-empt the enemy from escaping," he said.

Lieutenant Colonel Romeo Brawner, the military's chief information officer, said the MNLF rebels were armed with automatic rifles and M203 grenade launchers when they occupied the island.

"The rebels were threatening the civilians," he said. "Since August 15, residents fled the island. We were negotiating for the surrender of the gunmen until Tuesday."

But the rebels refused to leave the area by sunset Tuesday, prompting the military to launch the assault.

The MNLF used to be the largest Muslim rebel group fighting for an independent Islamic state in the southern region of Mindanao until it signed a peace agreement with the government in 1996.

Under the agreement, the MNLF's fighters laid down their arms and its leaders headed an autonomous Muslim region in Mindanao.

However, many MNLF members have complained about the government's alleged failure to keep its commitments under the peace agreement and have again taken up arms.

In 2001, MNLF leader Nur Misuari led a failed uprising against the government to protest the slow implementation of the peace pact, leaving more than 100 people dead.

Misuari, former governor of the Autonomous Region in Muslim Mindanao, was captured in Malaysia and subsequently extradited to the Philippines, where he is now on trial on rebellion charges. (dpa)