Malaysia's government said Thursday its security forces have surrounded dozens of Philippine gunmen in a remote area of Borneo island, and a report said the group is demanding the right to stay.
Home Minister Hishammuddin Hussein told reporters about 80 to 100 gunmen had been cornered by security forces near the small coastal town of Lahad Datu in the Malaysian state of Sabah.
He said security forces were in control and negotiating with the group, some of whom were armed.
The area was once controlled by the former Islamic sultanate of Sulu and has a history of incursions by armed Filipino Muslim groups.
Malaysia's national police chief Ismail Omar was quoted as saying the militants had declared themselves followers of "a descendant of the Sultan of Sulu."
Ismail, quoted on the website of The Star newspaper, said the group demanded to be recognised as the "Royal Sulu Sultanate Army" and insisted that as subjects of the sultanate, they should be allowed to remain in Sabah.
"They have made known their demands while we have told them that they need to leave the country," the police chief was quoted as saying, adding that negotiations with the group were still under way.
The report did not elaborate.
Earlier Thursday Prime Minister Najib Razak was quoted by The Star as saying police were negotiating with the gunmen "to get the group to leave peacefully to prevent bloodshed".
The report said a tight security ring including Malaysian army and naval forces had been drawn around the "heavily armed" group.
The Sulu sultanate, first founded in the 1400s, was once a regional power center, controlling islands in the Muslim southern Philippines and parts of Borneo including Sabah until its demise a century ago.
Security on Sabah's coast has been a problem for Malaysia, with tens of thousands of Filipinos believed to have migrated illegally to the state over the past few decades from the adjacent southern Philippines.
People continue to move freely across the maritime border from the southern Philippines, which has been racked for decades by Islamic separatist insurgencies and other lawlessness.
In 2000, guerrillas of the Islamic militant Abu Sayyaf movement seized 21 mostly Western holidaymakers as hostages at the Malaysian scuba diving resort of Sipadan near Lahad Datu.
The hostages were taken to Philippine islands and later ransomed.
Mainly Muslim Malaysia hosted long-running talks between Manila and the southern Philippines' main Muslim separatist group that resulted in a framework agreement last year aimed at ending their insurgency.
A Philippine Department of Foreign Affairs spokesman has said Manila was in touch with Malaysia over the case.