More than 20 Cameroonian soldiers have been killed during fighting in the Bakassi peninsula near the border with Nigeria, say Cameroon army officials.
Details of the clash remain unclear. Cameroonian military sources told the BBC the attackers wore Nigerian military uniforms and ambushed a boat.
But the Nigerian military are blaming militants from the volatile Niger Delta for the attack.
The Niger Delta lies just west of the sensitive and oil-rich peninsular.
Nigeria handed the Bakassi peninsula over to Cameroon more than a year ago in compliance with a ruling by the International Court of Justice.
Delta militants?
The Nigerian army said the raid could have been carried out by the same group of gunmen that had earlier attacked a nearby oil terminal run by Exxon Mobil.
If so, this will be the first time that Nigerian militants have attacked Cameroonian territory, says the BBC's Alex Last in Nigeria.
He says there are a number of questions to be answered about why such a raid would be carried out now; was it simply an opportunistic attempt to grab weapons, or was it an attempt to show local Nigerian dissatisfaction with the Bakassi handover, or was it a deliberate attempt by a militant group to escalate the violence in the region?
So far, no-one has claimed responsibility.
The BBC's Randy Joe Sa'ah in Cameroon says that military sources told him the attackers wore Nigerian military uniforms and attacked a Cameroonian military boat carrying food intended for soldiers on the peninsula.
They killed the Cameroonian soldiers on board and put on their uniforms. They then went to the peninsula and shot and wounded more unsuspecting soldiers before getting away with some military equipment.
Our reporter says there is great surprise in the region at the incident as since the peaceful handover in August 2006, the area has been quiet.
Sovereignty dispute
There were a series of bloody clashes between Nigeria and Cameroon in the 1990s.
Many living in Bakassi before the ruling saw themselves as Nigerian
The peninsula had been administered by Nigeria since independence from Britain in 1960.
However, Cameroon based its claim of sovereignty over the region on maps dating back to the colonial era and was successful at the International Court of Justice after a lengthy case.
Bakassi juts into the Gulf of Guinea, an area which may contain up to 10% of the world's oil and gas reserves.
It is also rich in fish and most locals are fishermen.
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