Russian President Vladimir Putin, who came to power in 2000 by talking tough on Chechnya, ordered his security forces to throw a ring of steel round the town of Nalchik and kill any gunman who put up resistance.
Regional officials quoted by Russian news agencies said that at least 12 local residents had been killed and 64 others wounded.News agencies put the number of militants at around 150 and some as high as 200.
This was not confirmed by security forces, but Deputy Interior Minister Alexander Chekalin, in televised comments, said 50 fighters had been killed. Between 10 and 12 police officers had been killed.
Kremlin envoy to southern Russia, Dmitry Kozak, said that overall the town was under control.
The bold, highly-coordinated attack on police, army and Federal Security Service (FSB) points in Nalchik marked the first major rebel operation since Abdul-Khalid Sadulayev took over as leader of the Chechen separatists in March.
