Cameroon and Nigeria are now working together to find out who killed 21 Cameroonian soldiers in the Bakassi peninsula near their border on Tuesday.
Initially Cameroonian military sources said that the attackers wore Nigerian military uniforms and ambushed a boat.
While Nigeria blamed local militants from the volatile Niger Delta region.
Nigeria handed the sensitive and oil-rich Bakassi peninsula over to Cameroon in August 2006 after a ruling by the International Court of Justice.
So far, no-one has claimed responsibility for the attack which according to Cameroon's secretary general at the presidency, Laurent Esso, involved a group of unidentified individuals aboard boats and who apparently were not soldiers.
Mr Esso also said that 10 of the assailants were killed and one of their seven boats was destroyed when the Cameroonian army returned fire.
Nigerian army spokesman Colonel Solomon Giwa Amu emphasised he was, "categorically denying that Nigerian soldiers attacked anyone in that area [Bakassi peninsula], we don't even have troops in that area".
The handover was unpopular with Nigerian residents
Col Amu told the BBC's Network Africa programme: "We are all abiding by the decisions of the court; we withdrew our troops in compliance with that decision and ever since the relationship between the two countries have been at an all time high."
Replying to the allegations of whether there was a link between the Bakassi attack and an earlier attack on a nearby oil terminal run by Exxon Mobil, also on Tuesday, Col Amu said: "Such claims could not be made until they were verified."
There is great surprise in the region at the incident as since the peaceful handover in August 2006, the area has been quiet.
There were a series of bloody clashes between Nigeria and Cameroon in the 1990s.
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.