The Turkish army says it has inflicted "heavy losses" on rebels from the Kurdish separatist PKK movement across the border in Iraq.
Turkish troops have massed on the Iraqi border
The army said it fired on a group of about 50 rebels, though the statement did not say troops entered Iraq.
In October, Turkey's parliament voted to allow the military to launch operations into Iraq to combat the PKK, which had stepped up attacks in Turkey.
But Iraq and the US have urged Turkey not to carry out its threat.
"As part of intelligence work, a group of 50-60 PKK terrorists was spotted inside Iraq's borders," south-east of the Turkish town of Cukurca in Hakkari province, the army said on its website.
"The terrorists came under intensive fire from fire support assets that were deployed near the region," the statement said, and "sustained heavy casualties".
The army said it could take further action in the region "with other components" when necessary, in a possible reference to ground troops.
An anonymous senior PKK leader was quoted by the AFP news agency denying any attack had taken place.
"Our area is quiet. Nothing has happened," he said.
However Firat, a pro-Kurdish news agency, cited Iraqi Kurdish officials reporting shelling in the area on Saturday "that lasted nearly two hours".
Turkish forces have periodically shelled suspected rebel positions in Iraq, and sometimes Turkish troops have crossed the border briefly in "hot pursuit" of the PKK.
But Turkish Prime Minister Recep Tayyip Erdogan said on Friday that his cabinet had authorised the armed forces to launch major cross-border operations, without the need to refer back for approval.
It followed October's parliamentary vote, in which MPs overwhelmingly backed a resolution giving the government permission to send troops into Iraq.
The government has been under intense pressure from the Turkish public to respond to a spate of deadly attacks on troops and civilians in south-eastern Turkey, says the BBC's correspondent in Istanbul, Sarah Rainsford.
As many as 3,000 PKK members are believed to be based inside northern Iraq. Turkey has accused the local Kurdish authorities of supporting them, our correspondent says.