At least 12 Turkish soldiers have been killed following an ambush by Kurdish rebels near the Iraqi border - with 32 rebels also killed, officials say.
The attack on Turkish troops was one of the deadliest for some time
The PKK guerrilla group claimed it had also taken "several" soldiers hostage, but this was denied by the government.
Turkish Prime Minister Recep Tayyip Erdogan has called a crisis meeting in Ankara, which is likely to consider whether to attack PKK bases in Iraq.
But the defence minister said such action would not take place "urgently".
"There are plans to cross border" but "not urgently", Vecdi Gonul said after meeting US Defence Secretary Robert Gates in Ukraine.
On Wednesday, MPs voted overwhelmingly in support of a motion to allow the military to launch offensives across the border, against rebels based in the remote, mountainous north of Iraq.
It followed an escalation of raids by the PKK - the Kurdistan Workers' Party - as part of its armed campaign for Kurdish autonomy.
Recent attacks blamed on the group have left more than 40 Turkish soldiers and civilians dead.
Iraq has urged Turkey not to strike across the border.
Iraqi President Jalal Talabani, himself a Kurd, called on the PKK rebels to lay down their arms.
"But if they insist on continuing to fight, they should leave Iraqi Kurdistan and not create problems here," he said.
Iraq's parliament passed a motion condemning Turkey's threat of force, but also called for the PKK to leave Iraq.
In the latest attack shortly after midnight, a large group of PKK rebels crossed the border from Iraq and staged their assault near the village of Daglica in Hakkari province, the Turkish military said.
The army said it sent reinforcements and helicopters to the area, fired artillery and launched retaliatory attacks in which 32 guerrillas were killed.
PKK sources confirmed the fighting, and claimed more troops were killed than the official figure of 12.
"There were clashes with the Turkish troops late last night in which we have killed at least 16 soldiers and wounded 20. We also captured several," Reuters quoted an unnamed rebel source as saying.
Turkey's defence minister denied that, saying: "There are no hostages."
Not far from the scene of the fighting, a minibus was later caught in a landmine explosion, also blamed on the PKK, that injured 10 civilians, the state news agency Anatolia said.
Thousands of Turks joined protests in several cities denouncing the attacks and calling for action against the PKK.
The prime minister said: "We are very angry."
But he said he was "resolved to deal with these matters in a cool-headed manner".
About 3,000 PKK fighters are believed to be based in northern Iraq near the Turkish border, says the BBC's Sarah Rainsford in Istanbul.
Formed in late 1970s
Launched armed struggle in 1984
Dropped independence demands in 1990s
Wants greater autonomy for Turkey's Kurds
Leader Abdullah Ocalan arrested in 1999
Ended five-year ceasefire in 2004
There have been regular clashes in the area since earlier in the year, but the latest attack was one of the deadliest for some time.
The clashes will increase pressure on the government from the public and the military for a tough response, our correspondent says.
The United States, Turkey's Nato ally, has called for restraint, fearing that any incursions would destabilise Iraq's most peaceful area - the autonomous Kurdish region in the north.
The White House decried the PKK's actions, saying: "These attacks are unacceptable and must stop now."
More than 30,000 people have been killed since the PKK began fighting for greater autonomy for the largely-Kurdish south-eastern Turkey since 1984.