It says more than 50 other soldiers were wounded on Saturday during the clashes with members of the Abu Sayyaf group on Basilan Island.
Five militants including a Moroccan national were killed, the army said.
The army was reportedly targeting an Abu Sayyaf commander who has pledged allegiance to the Islamic State group.
The US government has offered a reward of up to $5m (£3.5m) for information leading to the capture of Isnilon Hapilon.
At least four of the soldiers were beheaded in the clashes with about 100 Abu Sayyaf militants, AFP quoted a regional military spokesman as saying.
"Our group was heading to attack them. On the way, they were ambushed," Colonel Benedict Manquiquis, spokesman for the army unit involved in the battle, told radio station DZRH.
"The enemy had the high ground so no matter where our soldiers fled to seek cover, they could still be hit by the heavy firepower and improvised explosive devices," he said.
Among the five militants killed were a Moroccan, Mohammed Khattab, and one of Hapilon's sons, Ubaida, Reuters reported.
The fighting came a day after Abu Sayyaf released retired Italian priest Rolando Del Torchio
Government forces had moved against Abu Sayyaf after a series of abductions of foreigners, regional military spokesman Major Filemon Tan said.
On Friday a retired Italian priest being held hostage by the group was released after six months in captivity.
Eighteen other foreign hostages including two Canadians and a Norwegian are being held in the Philippines.
Almost all are thought to be in the hands of the Abu Sayyaf group in encampments on Jolo Island, near Basilan Island.
The Abu Sayyaf group was set up in the early 1990s with money from al-Qaeda.
Abu Sayyaf has a history of kidnapping tourists for ransom
Source: bbc.com