Sudan's army killed a key rebel leader and 30 of his Darfur-based troops in a battle which was still continuing on Sunday, officials said, after rebels announced an advance towards the capital.
Khalil Ibrahim, 54, who led the Justice and Equality Movement (JEM), was wounded on Thursday evening in a clash with government forces in Umm-Gozain, an area of North Kordofan state near North Darfur, army spokesman Sawarmi Khaled Saad told reporters.
"He died on Saturday evening" and was buried shortly afterwards, he said.
"In the clashes on Thursday, 30 of his troops were killed and a number of them were injured," Saad added. "We destroyed 12 Land Cruisers, four trucks and a tanker of oil."
The battle was continuing on Sunday, Information Minister Abdullah Ali Massar said at the same news conference, where officials refused to answer questions.
"The fighting is still going on in North Kordofan and North Darfur," Massar said.
Ibrahim's JEM was once the most heavily armed group in the Darfur region, although its recent strength remains unclear.
JEM said it would issue a statement later on Sunday.
Asked about the reported killing, a source close to the group said: "I'm pretty sure it's true."
Ibrahim's wife and daughter tried to hold a mourning ceremony at their home in south Khartoum but police forbade it, a witness told AFP.
The governor of North Kordofan said on government-run Sudan TV that rebel vehicles were seen burning after the clash.
Two fighter jets were also observed over the North Darfur capital of El Fasher at about mid-day on Sunday, a witness told AFP.
On Saturday the official news agency SUNA quoted Saad as saying the military was combing the North Kordofan-North Darfur region after JEM "attacked civilians" and targeted local leaders while looting their property in the Umm-Gozain, Goz Abyadh and Aramal areas.
The JEM announced on Thursday through its London-based spokesman that its forces had advanced into North Kordofan and were heading eastward towards Khartoum on a mission to topple President Omar al-Bashir's regime.
Saad told reporters that JEM brought about 140 vehicles and 300 troops into North Kordofan where they "took 700 people" to force them to join the movement.
A number of them fled to the army side after Ibrahim's death, he added.
In 2008, more than 200 people were killed when JEM guerrillas drove about 1,000 kilometres (600 miles) across the desert to the edge of Khartoum. Government troops repulsed them after heavy clashes, but the brazen attack shocked the regime.
In July, the government signed the Doha Document for Peace in Darfur with the Liberation and Justice Movement, an alliance of rebel splinter factions.
JEM and other key rebel groups - factions of the Sudan Liberation Army headed by Minni Minnawi and Abdelwahid Nur - did not join the pact.
Instead, last month they and the SPLM-North rebel group ratified documents forming the new Sudanese Revolutionary Front dedicated to "popular uprising and armed rebellion" against the National Congress Party government in Khartoum.
Ibrahim was a key player in the early days of the Darfur conflict which erupted in 2003 between non-Arab rebels and the Arab-dominated central government.
But recently the group's interests had turned away from Darfur.
The source close to JEM said the implications of Ibrahim's death remain unclear, "except to say it's a very significant turn of events for the Darfur rebellion and will definitely lead to a re-ordering within that particular movement."
In October, Ibrahim told AFP he had "returned to my country to fight for the rights of the people in all regions of Sudan."
He had sought refuge in Chad which expelled him in May 2010 after a surprise rapprochement with Sudan. Ibrahim then moved to Libya, whose leader Moamer Kadhafi offered him sanctuary before his regime collapsed this year.
According to the United Nations, at least 300,000 people have been killed in Darfur, while the Khartoum government puts the death toll at 10,000.
UN officials say 1.9 million people are internally displaced and still living in camps in Darfur, with about 80,000 newly displaced by fighting this year.
Six people including Bashir are being sought or are before the International Criminal Court in The Hague for alleged crimes in Darfur.