Foreign jihadists have been identified among the Islamist militants killed in Marawi over the past days, officials say.
Six terrorists, including Indonesians and Malaysians, were killed as the army continued its operation to drive the fighters out of the city.
Attack helicopters and US-trained special forces have been deployed in the counter-offensive.
It is a rare admission by Philippine authorities that local jihadists are conspiring with international groups such as the Islamic State (IS).
Fighting in Marawi erupted after a failed army raid to capture Isnilon Hapsilon — an Abu Sayyaf commander and the official representative, or ‘emir’, of IS in the region.
At least 11 soldiers and 31 militants have since been killed and Hapsilon, who has a $5 million FBI bounty on his head, remains at large.
Manila’s solicitor-general said that what used to be domestic rebels have now subscribed to the ideology of IS.
“What is happening in Mindanao is no longer a rebellion of Filipino citizens. It has transmogrified into an invasion by foreign fighters,” Jose Calida told a news conference.
“They want to make Mindanao part of the caliphate.”
The government and army have long downplayed the numbers of foreigners among local fighters, Sidney Jones, director of the Institute for Policy Analysis of Conflict in Jakarta told the BBC.
“And it’s crucial that the government acknowledges that there is a serious IS problem in the Philippines,” she says, explaining that a much better co-ordination between local and national authorities was needed to deal with the situation.
The admission confirms what observers see as moves by IS targeting the majority Muslim southern Philippines to establish a stronghold in South East Asia as it continues to lose ground in the Middle East.
“It is clear that the number of men from both Indonesia and Malaysia who have travelled to Mindanao has increased over the past year,” Ms Jones added.