Kuala Lumpur has turned down calls for a ceasefire from Filipino fighters who stormed a Malaysian village in the northern Borneo state of Sabah.
Malaysian Prime Minister Najib Razak said the intruders, who occupied the village of Kampung Tanduo for three weeks before going into hiding following a military raid by government troops, must surrender unconditionally.
"They have to surrender their arms. They have to do it as soon as possible," Najib said.
Later, 31 intruders were killed in gunfights with Malaysian forces, national police chief Ismail Omar said. No Malaysians were injured.
Filipino fighters are led by a brother of Sultan Jamalul Kiram III, of the southern Philippine province of Sulu, who claims sovereignty over northern Borneo.
Kiram, 74, maintains Sabah, a resource-rich region of timberlands and palm oil plantations, belonged to his sultanate for centuries and has only been leased to Malaysia, which he claims still pays a yearly lease of 5,300 Malaysian ringgit (£1,130) to the Sulu Sultanate.
However, the amount is considered inadequate by the Sultan, who lives in a rundown building in the Philippines capital of Manila.
"I'm the poorest Sultan in the world," Kiram said. "[Sabah] it's really very rich. When I'm in Sabah, I feel at home."
Sabah was leased by one of Kiram's predecessors to the British East India Company in the 18th century and became part of Malaysia at the end of colonial rule in 1963.
Seeking the splendours of a bygone era, Kiram's younger brother Agbimuddin sailed through naval patrols and landed at the head of about 200 gunmen in the disputed region to occupy Kampung Tanduo earlier in February.
Agbimuddin entered a standoff with Malaysian forces that left 27 people dead.
Kuala Lumpur troops, backed by airstrikes and mortar attacks, retook control of the village earlier this week.
However most of the Filipino fighters managed to escape and find shelter in the surrounding forested hills.
UN Secretary-General Ban Ki-moon has called for an end to the violence, worried about risks of it escalating, given the presence of an estimated 800,000 Filipino immigrants in northern Borneo.
"The Secretary-General expresses concern about the impact this situation may have on the civilian population, including migrants in the region," a statement by Ban read.
"He urges all parties to facilitate delivery of humanitarian assistance and act in full respect of international human rights norms and standards."
Kiram answered by ordering his fighters to observe a unilateral cease-fire, but hold their positions.
"They will not take any action. They will remain in the place where they are now. They will not expand operations," the Sultan's spokesman, Abraham Idjirani, said.
"Don't believe this offer of a cease-fire by Jamalul Kiram," Malaysian defence minister Ahmad Zahid Hamidi wrote on Twitter. "For the sake of the people of Sabah and Malaysia, eliminate all militants first."
Since the crisis began, a total of 60 people - 52 Filipinos and 8 Malaysian policemen - have died.