MANILA (REUTERS) - The Philippines' most wanted Islamist militant was killed by his own bodyguards in pursuit of a bounty offered by the United States, the head of the military said on Monday.

Abdul Basit Usman, a militant with strong Al-Qaeda links who was blamed for numerous bomb attacks in the southern Philippines, had been hunted by security forces since 2002.

"There was in-fighting among his group," General Gregorio Pio Catapang told journalists at the main army base in Manila. "Reports reaching this headquarters revealed that Usman and five of his unidentified cohorts were killed in a shoot-out allegedly with fellow members of his group."

Catapang said he had information that Usman's followers had turned on him on Sunday because of a US$1 million (S$1.3 million) bounty offered by the US State Department, without elaborating.

But his account was contradicted by the country's largest Muslim rebel group, which said its fighters killed the renegade Usman.

In March 2014, the Philippines signed a peace deal with the Moro Islamic Liberation Front (MILF), ending about 45 years of conflict that has killed 120,000 people and displaced 2 million.

But the rebels will not lay down weapons until after a final peace deal is reached. They are waiting for Manila to set up a new Muslim autonomous government in the south, granting wider powers over its economy, politics and social life.

Catapang said Usman was travelling with seven bodyguards towards a rebel camp in Guindulungan town, on the southern island of Mindanao, when a firefight erupted within his group.

"The bodies were discovered by Moro Islamic Liberation Front rebels," he said, adding that army and police units were trying to establish the identities of the slain militants.

The MILF's chief peace negotiator, Mohagher Iqbal, told Reuters that Usman was killed by its forces when he resisted arrest.

Usman's group was intercepted by rebel forces near a creek at around 10.30 am on Sunday, but chose to shoot it out rather than be taken to the guerrilla's main camp, he said.

Both Catapang and Iqbal said Usman's death would be a boost to the peace efforts. "Our security operations will continue until we get all the potential spoilers to the peace process," Catapang said, adding that there were still 10 foreign Islamist militants and about 100 local renegade Islamist militants in the south.