Boko Haram, Nigeria's Islamic extremist rebel group, said it controls the northeastern city of Gwoza and has added it to an Islamic state that it claims it has established in Nigeria.
Gwoza, in Borno state, is now part of its "Islamic Caliphate" asserted Boko Haram's leader, Abubakar Shekau, in a video seen on Sunday.
"We are grateful to god for the big victory he granted our members in Gwoza and made the town part of our Islamic Caliphate," Shekau said in the video.
But Nigeria's army said on Twitter: "That claim is empty ... the Nigerian state is still intact."
President Goodluck Jonathan declared a state of emergency in three northeastern states in May last year, saying the militants had taken over parts of Borno state, Boko Haram's birthplace.
After the emergency was imposed, the military seemed to be gaining control of parts of the northeast, killing militants and sending them fleeing into neighboring states. But Boko Haram's violent attacks have increased, killing thousands this year.
A Nigerian military official, who insisted on anonymity because he is not authorized to speak to the press, on Monday confirmed that soldiers fighting Boko Haram in the town of Gamboru Ngala, on the border with Cameroon, were forced to flee into Cameroonian territory.
"The fight in Gamboru-Ngala is still ongoing; and our men are living up to their bid; that is all I can say for now," said the official. He couldn't give more details on the clash.
More than 4,000 people -- mostly civilians -- have been killed this year alone in the conflict, including in attacks by Boko Haram and in responses by the security forces, Amnesty International said on Aug. 5. This compares to an estimated 3,600 people killed in the first four years of the Islamic extremist insurgency.
Nigeria's fight against Boko Haram began in 2009 but took the international spotlight in mid-April when the militants kidnapped more than 200 schoolgirls, who still remain captive.