The battle for the heights in Tirah Valley of Khyber tribal region intensified yesterday as fighter jets and gunship helicopters targeted militant positions.
Reports from the region said the death toll for both security forces and the Lashkar-e-Islam was "very high".
At least 30 security personnel and 97 militants had died in the fighting, military sources were quoted as saying on the website of Dawn newspaper.
The militants were killed in strikes by ground forces backed by artillery and mortar fire.
Lashkar-e-Islam and Tehrik-e-Taliban Pakistan positions at several places in Tirah Valley were overrun by troops and a fierce battle was continuing.
The militants were putting up stiff resistance since the offensive was launched on Friday, the military sources said.
Security forces had taken their "heaviest toll in one of the bloodiest and most difficult operations in Tirah Valley", unnamed security officials were quoted as saying by Dawn newspaper.
The officials acknowledged that officers, including one from the Special Services Group, were among the dead.
The death toll could not be independently confirmed as journalists are barred from reporting from the tribal region.
"Fighting has been heavy on the first two days. Resistance is still there. (But) security forces are making steady progress," a security official was quoted as saying.
The elite Special Services Group has been pressed into the battle for the strategic Tirah Valley, which sits astride the famed Tora Bora mountain range in Afghanistan's Nangarhar province.
Pro-Taliban fighters fleeing an operation in Orakzai Agency had overran Tirah Valley last month and taken control of the region from the pro-government Ansar-ul-Islam militant group and causing an exodus of over 40,000 people.
Over 500 militants from Orakzai, Waziristan, Mohmand and Bajaur tribal regions and the Swat Valley and some Uzbeks were present in Tirah Valley.
"The fall of Tirah was a huge setback for us. Just when we thought the militants were all holed up and had nowhere to run to, they managed to break the siege and take control of Tirah," a senior unnamed government official said.
Tirah's fall set alarm bells ringing in Peshawar, which is a short distance from Bara, a plain area in the foothills of Khyber Agency.
"Peshawar is just an hour's drive. This will make (the security) situation (in the city) all the more precarious," one official said.
Meanwhile, Tehrik-e-Taliban Pakistan spokesman Ihsanullah Ihsan said the Lashkar-e-Islam was fighting security forces and the Taliban would support the group when needed.
He claimed only five Lashkar-e-Islam cadres, including a commander, had been killed.