Prime Minister Najib Razak said in a statement that every effort has been made to peacefully resolve the issue, but that the Tuesday raid was necessary "to safeguard the dignity and sovereignty" of Malaysia.
The dispute began in mid-February when around 200 members of the armed group stormed a seaside village and demanded to be recognized as the ancestral owners of the eastern Malaysian state of Sabah.
A shootout erupted Friday leaving 12 intruders and two policemen dead. Since then 19 more gunmen and eight police officers have been killed.
Malaysian fighter jets pounded the area for about 30 minutes on Tuesday, before hundreds of soldiers were sent to the area.
A spokesperson for the Filipino group said its leaders had survived the bombardment and insisted they would not surrender.
The conflict is Malaysia's worst security crisis in years, and threatens to damage ties with the Philippines.
Manila has urged the group to stop the conflict and return home. But it has also urged Malaysia to exercise restraint and not to harm the interests of the estimated 800,000 Filipinos in eastern Sabah state.
On Tuesday, Philippine Foreign Secretary Albert del Rosario was in Kuala Lumpur for talks with his Malaysian counterpart on the situation.
The exact number and identity of the fighters is unknown. Some members of the group say they are ready to die for their cause, warning that more militants were poised to land in Sabah.
The militants say they belong to the now defunct Sultanate of Sulu, a former Islamic power that once controlled parts of Borneo, along with some parts of the southern Philippines.
Although the sultanate lost power about a century ago, 74-year-old Manila-based Islamic leader Jamalul Kiram III says the resource-rich area belongs to his family and was illegally merged with Malaysia after it was granted independence by Britain.
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