Dozens of people trapped in a deadly urban battle between Muslim rebels and Philippine troops rushed to safety Tuesday as the guerrillas lost ground in more heavy fighting, authorities said.

Sixty-one people have died and 70,000 residents been displaced since the standoff in the major southern city of Zamboanga began more than a week ago when hundreds of Moro National Liberation Front (MNLF) gunmen sought to plant an independence flag.

Hundreds of other civilians had remained trapped as the rebels sought shelter from a military assault in the Muslim neighbourhoods of the city, with the military saying the guerrillas were using some residents as hostages or human shields.

The military said Tuesday that a sustained offensive, which began on Friday and included helicopter rocket attacks, was proving a success.

"For the past 18 hours, we have been able to rescue 116 people due to pressure from our troops on the ground," military spokesman Lieutenant Colonel Ramon Zagala told AFP.

Dozens of shell-shocked men, women and children were trucked from the frontlines into a school taken over by police on Tuesday morning, according to an AFP photographer.

Zagala said soldiers had taken back over 70 percent of areas held by the MNLF forces in two coastal villages where the main fighting had raged since an assault was launched Friday.

A short burst of helicopter rocket fire on rebel positions Monday dislodged them from some areas in the villages, allowing ground troops to advance further, he said.

Zagala said there were no civilians hurt in the air strikes, after rights groups voiced fears over the safety of those still who had not yet escaped.

However Zagala said about 100 MNLF fighters were still engaged in clashes, and it remained unclear how many were still trapped or being held hostage.

Loud gunfire could be heard throughout Monday night and before dawn on Tuesday morning as the military took advantage of the darkness to further its offensive, according to an AFP reporter.

He said fighting was not intense on Tuesday and some shops had re-opened for the first time since the crisis began, although schools, air services and ferry operations remained suspended.

The rebels initially took dozens of hostages and burned hundreds of homes, forcing a shutdown of Zamboanga, a city of about one million that is a key commercial hub in the region.

Fifty-one MNLF rebels and six security forces have died in the fighting, according to the military. Four civilians, including a two-year-old who authorities said was a hostage, have also died.

Muslim rebels have been fighting since the 1970s for an independent or autonomous homeland in the south of the mainly Catholic Philippines. An estimated 150,000 people have died in the conflict.

The MNLF signed a peace treaty in 1996 that granted limited self-rule to the south's Muslim minority, and has since largely participated in the country's political process rather than foment violence.

But 71-year-old MNLF founder Nur Misuari has been angered by a planned peace deal between the Moro Islamic Liberation Front, a rival group with 12,000 gunmen, as he believes it would sideline his organisation.

He deployed his gunmen to Zamboanga to plant an independence flag, which security analysts said was intended to show the MNLF could prove a major threat if it continued to feel ignored.

President Benigno Aquino has described the autonomous region established under the 1996 pact with the MNLF as a "failed experiment", largely because the southern Philippines has continued to endure dire poverty and corruption.

Under the envisaged new peace deal, a new autonomous region would replace the MNLF-brokered one.

The rival MILF would have most control of the new autonomous region and the potential riches on offer if large mineral deposits and the area's fertile farming regions are exploited.

Zamboanga, about 850 kilometres (530 miles) from the capital of Manila, is a major industrial and trading hub for the southern Philippines.