Both sides claim to be ready for war
The Indonesian Government has declared martial law in the province of Aceh and authorised a military assault, after last-ditch peace talks with separatist rebels ended in failure.
President Megawati Sukarnoputri said the rebels' refusal to accept Indonesian sovereignty in Aceh had placed the province in a dangerous situation.
Government forces have already been heavily reinforced in Aceh and rebel leader Mahmood Malik has said his group is ready for war.
In another development, Indonesian police are reported to have re-arrested five senior rebel delegates, who were freed on Saturday before the talks started.
The two sides met in Tokyo at the weekend in an attempt to salvage a peace deal signed in December, under which Aceh would be given autonomy but not independence.
The meetings ended without agreement late on Sunday, and officials in Jakarta blamed the rebels from the Free Aceh Movement (Gam) for refusing to give up their demand for independence.
'Prepared for war'
Chief Security Minister Bambang Susilo Yudhoyono said the president had "ordered an integrated operation to begin".
The Indonesia Government wishes to continue its war on the Acehnese... We will fight, we are ready
Officials said the decree declaring the state of military emergency took effect at midnight (1700 GMT on Sunday).
Martial law, which gives the military sweeping powers, will last for six months but can be extended.
Rebel leader Mahmood Malik said he believed the Indonesian Government had no intention of compromising from the start of the weekend talks, and was "looking for a way to declare war".
"They asked us to abandon our independence. They asked us to surrender.
"We will oppose the onslaught. We will fight for independence," he warned.
Jakarta has said it is only prepared to offer regional autonomy and wants the rebels to disarm.
The Tokyo talks were organised at short notice in response to intense pressure from Indonesia's donor countries.
More than 10,000 people - the majority of them civilians - have been killed in decades of conflict between the Jakarta government and the rebels in Aceh.