ISLAMABAD, Pakistan – The Pakistani army has entered Mingora, the largest town in Swat valley, and a street-to-street battle is raging with the Taliban, the military said Saturday.

In what is likely to be the most dangerous and crucial phase of the campaign to retake the vast Swat area back from armed Islamic extremists, the army has taken the fight to the narrow streets of Mingora, where thousands of civilians are thought to remain trapped.

Residents who’ve fled said that several hundred fighters are present, and they’ve mined the streets, created bunkers and tunnels and taken positions on rooftops.

“The Taliban has a big hold on Mingora. It is going to be very difficult for the army,” said Shaukat Saleem, a Mingora resident who fled in recent days.

If the Taliban make a stand in the city rather than withdrawing into the hills and forests or disappearing into the civilian population as they’ve done before, a pitched battle could be costly to both sides, to the civilians caught in the middle and to both the insurgents’ and the government’s efforts to rally public support.

A gun battle between soldiers and the insurgents lasted around two-and-a-half hours Saturday, after which the troops retreated to their stronghold in the city around the Circuit House area, a district administrative complex, said Saleem, citing fleeing residents he’d contacted.

However, Athar Abbas, the army’s chief spokesman, told a news briefing that the area from Circuit House to the city’s Continental Hotel, a distance of a bit more than a mile, had been “cleared.” He said that there’d also been an “intense exchange” at a busy crossroads farther into town known as Nishat Chowk, in which one would-be suicide bomber was killed and one suicide-bombing vehicle was destroyed.

“Street fights inside Mingora have begun,” said Abbas. “Street by street, house by house, clearing will have to take place.”

The army has estimated that some 5 percent to 10 percent of Mingora’s 300,000 people remain in the city.

Those who managed to leave after the offensive to retake Swat began on May 7 say that mostly the elderly and ill had to stay behind.

“We are mindful that the terrorists will use them (residents of Mingora) as human shields,” said Abbas. “Therefore, the pace of the operation will be painfully slow.”

Although the army has claimed rapid progress, there are concerns that many Taliban fighters have escaped. The army previously warned that some Taliban have shaved their trademark beards, cut their long hair and posed as civilians to get away.

Earlier last week, the army pledged that the operation would not damage civilian property and that civilian casualties would be kept “very, very low.” However, those who’ve escaped from Swat tell of significant destruction and loss of life.

So far, the army claims to have killed 1,095 Taliban, which, if accurate, is a scale of killing that suggests that the insurgents have been fighting in relatively large formations not typical of a guerrilla force.