Five militants including a Moroccan national were killed, the army said.
The army was reportedly targeting an Abu Sayyaf commander who has pledged allegiance to the Islamic State group.
The US government has offered a reward of up to $5m (£3.5m) for information leading to the capture of Isnilon Hapilon.
The Islamic State threat in South East Asia
At least four of the soldiers were beheaded in the clashes with about 100 Abu Sayyaf militants, AFP quoted a regional military spokesman as saying.
"Our group was heading to attack them. On the way, they were ambushed," Colonel Benedict Manquiquis, spokesman for the army unit involved in the battle, told radio station DZRH.
"The enemy had the high ground so no matter where our soldiers fled to seek cover, they could still be hit by the heavy firepower and improvised explosive devices," he said.
Among the five militants killed were a Moroccan, Mohammed Khattab, and one of Hapilon`s sons, Ubaida, Reuters reported.
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