The army accused villagers of firing on the soldiers outside the town of Lhokseumawe, where two Indonesian soldiers disappeared last week. The military says local people abducted them.

More than 80 people, including some soldiers, were injured in the incident and at least 20 are believed to be in a critical condition.

A spokesman for the separatist Free Aceh Movement told the BBC that a contingent of troops went to the village of Lacang Barat, about 13 km west of Lhokseumawe, searching for members of the separatist group apparently in connection with the disappearance of one or more military personnel last week.

A large crowd of villagers gathered and a stand-off ensued.

The army says thousands of villagers, armed with guns, spears and machetes attacked a battalion headquarters outside the town. It says the villagers were killed when soldiers shot at the crowd to try and regain control.

However, the Free Aceh Movement's spokesman insisted there was no provocation.

'Exchange of fire'

Lieutenant-Colonel Anyanto, military chief of staff in Lhokseumawe described the clash as an exchange of gunfire between soldiers and civilians and said four military trucks had been hit by bullets.

Dozens of people have been killed in similar protests this year against human rights abuses carried out by the security forces.

Human rights groups say the Indonesian authorities have been responsible for the deaths of hundreds of civilians in Aceh over the past decade, during a campaign against separatist rebels.

Last year Indonesia announced a troop withdrawal from the province, but cancelled it following riots.

Correspondents say Lhokseumawe has seen several mass street protests since last month, mostly in support of a referendum on self-determination for Aceh, a staunchly Moslem province, in line with the recently agreed vote in East Timor.

President BJ Habibie has offered Aceh and other restive outlying provinces of the country a greater measure of autonomy and some politicians are calling for the creation of a federal structure for Indonesia.