(BBC) - Indonesian police have exchanged gunfire with the occupants of a house in Java, believed to include one of South-East Asia's most wanted men.Police said the anti-terror operation in the Temanggung district followed the arrest on Friday of several suspected militants loyal to Noordin Mohamed Top.
Noordin, a Malaysian citizen, is suspected of involvement in last month's bombings of two Jakarta hotels.
Later, police said they had killed two suspected militants near the capital.
Three others were arrested and up to 500kg of explosives were seized in the raid on a house in Bekasi early on Saturday, police said.
Gen Bambang Hendarso Danuri told the Associated Press the explosives were intended for "a specific target", but gave no details.
Workshop raid
On Friday evening, police spokesman Nanan Soekarna said two men had been arrested in a workshop in a market in Temanggung, and that they had led police to a remote house in the same area.
Members of an elite anti-terrorism unit then surrounded the building. They are still exchanging fire with the three or four militants holed up inside, one of whom is believed to be Noordin, officials say.
Anti-terrorism officials initially said they had arrested two men at the house, one of whom they believed might be Noordin.
Later, a police source told the Reuters news agency they believed Noordin had been killed during the raid on the market in Temanggung and that they were now trying to confirm the identify of the body.
"He was shot dead at the workshop in Temanggung," he said, adding that the raids in the area had led police to the house in Bekasi.
Noordin was believed to be a key recruiter and financier for the regional Islamist militant group, Jemaah Islamiah.
He is thought to have been behind bomb attacks on the Jakarta Marriott in 2003 and the Australian embassy in 2004, and also on a series of restaurants in Bali in 2005 in which more than 20 died.
A lull in attacks since 2005 came to an end in July with the suicide attacks on two hotels in Jakarta that killed nine people and wounded 53, raising concerns that Noordin was becoming active again.
Correspondents say the search for Noordin has focused on central Java because he is believed to have a network of sympathisers there.
He is the Indonesian police's main target and there is a $100,000 (£59,000) reward for information leading to his capture.
