The Philippine government said two key leaders of the local terrorist group which have been laid siege to Marawi City for nearly two months have been killed Monday morning.

"We have received a report from AFP (Armed Forces of the Philippines) ground commanders in Marawi that the operation conducted by government forces to retake the last remaining Daesh-Maute stronghold in the city has resulted in the death of the last terrorist leaders Isnilon Hapilon and Omar Maute, and that their bodies have been recovered by our operating units," said Defense Secretary Delfin Lorenzana in a statement.

Lorenzana said 17 hostages have been rescued and "mopping up operations are underway."

Despite the deaths of the two leaders of Islamic State-inspired Maute terror group, the Philippine government is not yet inclined to immediately halt the military operations in war-torn Marawi City.

Hapilon, a leader of Basilan-based extremist Abu Sayyaf Group, is considered as the anointed IS leader in Southeast Asia.

Omar was one of the Maute brothers who led the attack in Marawi. His other sibling, Abdullah, was killed earlier, while their father Cayamora, who was arrested previously along with his wife in Davao City, died while in detention in Taguig City.

"We will also announce the termination of hostilities once government troops have ensured that the remaining terrorists holed up in the city are neutralized or captured and that they have cleared all structures of improvised explosive devices (IEDs) and other traps," Abella said.

Abella said the soldiers have recovered their bodies. Pictures of the slain terrorist leaders circulated on the social media sites.

"Once the fighting stops and the clearing operations end, we will put our efforts and energies on the challenging task of rebuilding and rehabilitating Marawi," Abella added.

The Bangon Marawi task force could not enter the Marawi main battlefield to conduct post disaster needs assessment because of the ongoing firefight.

Lorenzana earlier said over P50 billion might be needed to rebuild Marawi.

The entire Mindanao has been under the state of martial law since May 23 shortly after the militants attacked and started occupying Marawi. Robina Asido-Celerina Monte/DMS