The army, which is battling to crush a four-year Islamist uprising in Nigeria, said it deployed bombs and ground troops to destroy insurgent camps in Borno yesterday.
Army spokesman Mohammed Dole said that "74 suspected militants" were killed in the assault outside the Borno capital Maiduguri, where Boko Haram was founded more than a decade ago.
The operation followed an assault Monday on Boko Haram camps in another part of Borno, which the military said left 37 Islamists dead.
The officer said there were casualties from the attack, which will be seen as a setback in the campaign to end the insurgency.
The military had claimed an offensive launched more than four months ago had put Boko Haram on the defensive and left it incapable of attacking major urban centres like Damaturu.
Figures released earlier this year said the conflict had cost more than 3,600 lives, including killings by the security forces. The current toll is certainly much higher.
"They invaded the city in large numbers in vehicles and on foot from different directions," the officer said.
They then opened fire "on police facilities with guns and explosives and engaged soldiers and policemen in a fierce gunfire exchange that continued deep into the night," he added.
The officer said the insurgents torched the area police command and at least three other police facilities.
"There are indeed casualties, including a number of the insurgents, but it is difficult to say how many they are", he said.
"We didn't sleep last night due to fright and the deafening gun sounds and explosions coming from all over the city," Sadi said.
"Everybody is still indoors because of a radio announcement of a 24-hour curfew by the military," he added.
Boko Haram, thought to be a fragmented group, with a murky leadership structure, has attacked churches, mosques, the security forces and schools across northern and central Nigeria, Africa's most populous country and top oil producer.
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