Soldiers in armoured personnel carriers continued to enforce a shoot on sight curfew around Lal Masjid, or the Red Mosque. They killed a male student and an apparently mentally ill man in the early hours of the day.

Women in black burqas and bearded young men streamed out of the compound and passed through metal detectors after the government set and then twice extended a deadline for them to give themselves up.

Male students fought gunbattles with security forces on Tuesday in a bloody climax to the mosque's six months of defiance against President Pervez Musharraf, including the abduction last month of seven Chinese nationals.

"Around 700 have come out, more are coming. They were provided with transport facilities to go to their homes," senior Islamabad administration official Chaudhry Mohammad Ali said.

Musharraf earlier said each of them would receive 5,000 rupees (83 dollars).

Security officials said an estimated 1,000 students were left in the building, about half of them female students, and added that it was possible the siege could go into a second night.

"We expect most of the women and about 300 more men will come out, then only the hardcore will be left inside. Our estimate is the militant element is only a couple of hundred," a senior security official said.

Those holding out were believed to include Taliban insurgents from the tribal areas bordering Afghanistan and sectarian jihadis belonging to banned Pakistani sectarian groups.

Students leaving the mosque said there were two dead bodies and several injured people inside. Many said they had no idea about the whereabouts of the two brothers who run the mosque compound.

Others pledged to continue the mosque's struggle for the enforcement of Islamic law, like the one installed by the Taliban regime in Afghanistan, which lasted from 1996 until the US-led invasion in 2001.

"It is not necessary to carry out jihad (holy war) right now. We can fight another day," said Mohammad Ibrahim from the northwestern town of Batagram.

Tensions remained high in the curfew area, which includes the AFP bureau.

Hundreds of troops also built sandbag bunkers and rolled out barbed wire to block off all roads. Electricity to the area immediately around the complex was cut during the night.

Deputy mosque leader Abdul Rashid Ghazi earlier offered a conditional surrender, but said he still insisted on the imposition of Islamic law. He was not immediately available for comment on the surrenders.

Ghazi added the mosque had enough supplies to carry on "until God wants."

The mosque has led a freelance anti-vice campaign in the capital including the abduction of several people accused of running brothels -- including the seven Chinese -- and raids on local music and DVD shops.

During the night Ghazi held talks over the telephone with a hardline opposition leader, Maulana Fazlur Rehman, in a bid to end the stand-off but had not spoken to the government.

A spokesman for Rehman said he was supposed to leave for London for a conference of opposition parties but had cancelled his flight to aid negotiations.

Tuesday's shootings left a soldier, a journalist, at least eight students and some bystanders dead. More than 140 people were wounded, many of them female students suffering from tear gas inhalation.