Nigerian police say that more than a hundred people have been arrested during raids on a slum area of Port Harcourt in the Niger Delta.
The operation is part of an attempt to tackle armed groups responsible for a wave of kidnappings in the Delta.
A German oil worker, held hostage by gunmen in south Nigeria for two weeks, was released unharmed on Saturday.
Guido Schiffarth was one of 15 people kidnapped by armed groups in the last two weeks. Five remain unaccounted for.
Security officials said the operation marked the start of a campaign ordered by President Olusegun Obasanjo on Tuesday, to break up armed gangs in the region.
"We have the mandate of the president to hunt them down and we are doing just that," a military spokesman said.
He said the operation which began at Diobu, a suburb of Port Harcourt, would extend to the creeks and swamps of the Delta "to flush out the criminals and terrorists whose stock in trade is to abduct oil workers in exchange for money."
Soldiers were seen patrolling the waterways on Saturday, while helicopters hovered over the city.
Oil production cut
Reports from Port Harcourt said there had been sporadic gunfire and soldiers had carried out house-to-house searches.
"This is the beginning of something bigger to drive all the bandits from the state," military spokesman Major Sagir Musa told news agency AP. "It will continue. It is ongoing."
The lack of employment, says the BBC's Alex Last in Lagos, has led to many young men joining armed groups.
Some diplomats and officials fear the government's heavy-handed approach may lead to more violence.
The abductions and attacks on oil facilities have cut Nigeria's oil production by 25%.
Nigeria is Africa's biggest oil exporter and the fifth-largest supplier of crude to the United States.
Militant leaders have launched attacks on the oil industry as part of their campaign for local control of oil wealth.
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