ISLAMABAD (Reuters) -Pakistani army helicopters were in action against Islamist rebels on Monday, blasting positions around a town near the Afghan border for a third day, a resident said.

Scores of people have been killed in the fighting that erupted on Saturday as U.S. President George W. Bush was meeting Pakistani President Pervez Musharraf in the capital, Islamabad, to spur his efforts in the war on terrorism.

"Helicopter gunships have been pounding militant positions around Miranshah," a resident of the main town in the North Waziristan tribal region said. "The situation is very tense."

The semi-autonomous ethnic Pashtun lands along the Afghan border are Pakistan's frontline in the war on terror.

Many al Qaeda militants fled to the area awash with weapons after U.S. and Afghan opposition forces ousted the Taliban in late 2001, and were given refuge by Taliban supporters among the Pashtun clans.

Pakistani forces have been trying to clear foreign militants from the border and subdue their Pakistani allies since late 2004 and hundreds of people have been killed.

The Pakistani military said about 50 militants and five government troops have been killed since Saturday when the militants launched attacks and seized government buildings in Miranshah in revenge for the killing on Wednesday of 45 of their comrades in a government attack.

Thousands of residents have left the town since last week's violence and the exodus was continuing on Monday, the resident said.

Government forces wrested back control of most of Miranshah on Sunday but the militants had not given up, he said.

"The firing went on intermittently with both sides using rocket-propelled grenades and missiles," said the resident who, like many people in the town, is fearful of militant reprisals and declined to be identified.

The town's telephone service had been partially restored after the army took back the main exchange, which the militants seized on Saturday, and troops were in control of the main market area, he said.

Waziristan has a long history of military intervention.

Britain won over some Pashtun tribes and made the region its first line of defense from perceived Russian designs on British India in the nineteenth century.

In the 1980s, a flood of U.S.-funded weapons and Islamist fighters poured into the area to bolster the Muslim holy war against Soviet forces occupying Afghanistan.

Today, Afghanistan complains of Taliban and other militants infiltrating from Waziristan and other Pakistani border areas to launch attacks against the U.S.-backed government in Kabul and U.S.-led foreign troops there.

The Afghan violence has strained relations between the uneasy neighbours, with Musharraf on Sunday deriding accusations the Taliban leader was in Pakistan as nonsense, and questioning the Afghan government's leadership.

A U.S. military spokesman in Afghanistan declined to comment on the row but welcomed the Pakistani action in Waziristan.

"We see this as a very positive move," Colonel Jim Yonts told a briefing in Kabul. "This issue in Waziristan is an example that they are fighting the war on terrorism."

Pakistan said on Sunday for the first time that militant violence in Waziristan was directly related to the Taliban insurgency and Pakistani areas would only be brought under control when the Afghan side of the border was stable.