A series of explosions and heavy gunfire have been heard in Islamambad after the leader of the besieged Red Mosque said he would rather die than surrender to Pakistan government forces.
Abdul Rashid Ghazi's statement came after the government rejected an earlier conditional offer he made to give himself up on Friday.
A cloud of smoke was seen rising above the mosque compound and security forces were seen moving towards the building, but officials denied that a raid was finally being launched. Officers outside said the explosions were aimed at scaring those holed up inside into a surrender.
A senior security official involved in the operation told the AFP news agency that students had exchanged automatic weapons fire with troops and thrown several hand grenades.
Military activity
Rageh Omaar, Al Jazeera's correspondent outside the mosque said there was still a large amount of military activity on Friday evening.
"The armoured personnel carriers and the soldiers are incrementaly moving closer and tightening a noose around the madrassa and the student that remain inside," he said.
Ghazi, whose brother Abdul Aziz was captured on Wednesday while trying to flee the mosque dressed in a burqa, urged the government to lift the siege of the mosque.
Speaking to the private Geo television station on Friday, he said: "We have decided that we can be martyred, but we will not surrender. We are ready for our heads to be cut off, but we will not bow to them.
"This may be my last conversation with you."Officials have said that women and children are being held inside as human shields, but Ghazi said they were there of their own free will.
"I had said that we will fight to the last, and now after seeing what they have done to the mosque and the way they have martyred children, I ask them to stop this brutality," Ghazi said.
"We were ready to leave everything in order to stop bloodshed."
Hostages
Tariq Azeem, the deputy information minister, dismissed the offer, saying that Ghazi was hiding in the mosque's basement with 20 women and an unknown number of children and could not escape justice.
"For the Pakistan army to go in is no problem, but safety is our foremost objective," he said. "We don't want to harm any innocent lives. We already know that these people are being kept as hostages."
The siege began when the Pakistani army surrounded the area on Wednesday, a day after at least 12 people were killed in clashes between security forces and armed activists from the mosque.
Water, gas and electricity supplies have been cut and food was running out, said one of about 20 people who left the fortified compound on Friday.
Another boy said older students were forcing younger ones to stay.
Pervez Musharraf, Pakistan's president, has not commented publicly on the siege but has urged security agencies to be patient and allow maximum time for parents to take children out of a madrasa, or school, in the mosque compound.
Liberal politicians had been pressing Musharraf for months to crack down on the brothers running the Red mosque and the president accused the mosque of sheltering al-Qaeda members.
The students carried out a series of provocative acts over the past six months, demanding the enforcement of Islamic law, and running a vigilante anti-vice campaign.
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