Government soldiers are reported to have fought their way into a mosque where militant Islamists are holding out, in the Nigerian town of Maiduguri.
A Nigerian general says the leader of the Boko Haram sect has escaped with hundreds of his followers, but the deputy leader was among those killed in the gun battle, which followed an artillery bombardment.
More than 200 people across northern Nigeria have died in fighting and violent outbreaks across several northern states.
Military officials in Nigeria say they've gained the upper hand after another day of fighting with the militant Islamists blamed for fomenting the violence.
Earlier this week, militants attacked police stations and government buildings in Maiduguri and other centres, killing at least 150 people.
Boko Haram says it is fighting against Western education. It says Nigeria's government is being corrupted by Western ideas, and it wants Islamic law imposed across Nigeria.
Nigerian President Umaru Yar'Adua has vowed that security forces will hunt down the remnants of the sect.
Four northern states are among the 12 of Nigeria's 36 states that started a stricter enforcement of sharia (Islamic law) in 2000, a decision that has alienated sizeable Christian minorities and sparked bouts of sectarian violence that killed thousands.
Africa's most populous country is roughly equally split between Christians and Muslims.