Officials in Pakistan say 10 soldiers and militiamen have been killed in a battle with suspected al-Qaeda fighters near.
Two men believed to be al-Qaeda fighters were also killed in the four-hour clash in the remote tribal area of South Waziristan in Pakistan's North West Frontier Province.
Tribal sources in the nearby garrison town of Wana told the BBC that four US operatives were also involved in the encounter.
An interior ministry official in Islamabad said the soldiers came under heavy fire when they closed in on a suspected al-Qaeda hideout.
Pakistan has deployed about 12,000 troops in tribal areas, traditionally outside the control of the central government, in an attempt to stop al-Qaeda and Taleban fighters slipping over the border from Afghanistan.
The gun fight took place in Kazha Panga village, some 30km (20 miles) from the border with the Afghan province of Paktita.
It is the first time that the suspected al-Qaeda fighters have engaged Pakistani forces in the region since President Pervez Musharraf ordered troops to the border in December.
The BBC's Rahimullah Yusufzai reporting from Peshawar said local villagers were preparing to leave the area due to fears that US warplanes may bomb the area.
A local doctor, Alauddin Kakakhel, told the BBC that there was a lot of concern over reports of US involvement in the incident.
He said local people did not object to Pakistani troops, but did resent the presence of Americans.
Pakistani military helicopters are searching the area for the attackers, and officials said local tribal leaders had pledged to help track them down.
There were no further details on the US operatives involved.
But US Army Green Berets, CIA paramilitary units and telecommunication experts are all active in the area, searching for Osama bin Laden and other al-Qaeda and Taleban officials.
Ahmad Khan, a senior Pakistan government official in Wana, said six Pakistani troops and three suspected al-Qaeda fighters were also wounded in the exchange.
Of the troops killed, six were regular Pakistani soldiers including two officers and four belonged to the paramilitary Frontier Corps.
Pakistani officials said the two al-Qaeda fighters killed were Chechens but tribesmen in Wana said they were either Tajiks or Uzbeks.
There were also reports that one al-Qaeda fighter was captured but the Pakistani authorities have yet to confirm this.
New checkpoints have been set up in recent weeks and troop patrols intensified in an attempt to capture al-Qaeda and Taleban fighters.
Pakistan until recently resisted US pressure to launch large-scale search operations in the semi-autonomous border region for fear of provoking tribal opposition.
But army officials say they have received the full co-operation of tribal leaders in North and South Waziristan, previously considered no-go areas.
The tribal areas, set up after partition from India, stretch for hundreds of miles along the border with Afghanistan.
Although strictly speaking part of Pakistan, they have their own laws and customs and the writ of the authorities does not run there.news.bbc.co.uk/hi/english/world/south_asia/newsid_2066000/2066964.stmE-mail this article