At least 45 militants have been killed by a missile fired by a US drone aircraft in South Waziristan, Pakistani intelligence officials have said.

The militants are said to have been meeting after a funeral in Makeen - the stronghold of Pakistani Taliban leader and al-Qaeda ally Baitullah Mehsud.

"They targeted newly built bunkers," local resident Mohammad Daud said.

Meanwhile, an unidentified gunman has murdered Mehsud's rival Qari Zainuddin - a potential blow for the Pakistani government as the militant commander may have been about to mount a challenge against Mehsud.

The killing comes as the Pakistani military prepares for an offensive against Mehsud, who has been accused of a string of bomb attacks, including the assassination of former prime minister Benazir Bhutto in 2007.

Zainuddin, who had recently spoken out strongly against Mehsud, was killed in the northwestern town of Dera Ismail Khan, police said. The gunman, who also wounded another man, escaped, security officials said.

It is thought Mehsud, who was accused of being behind the killing of a prominent anti-Taliban cleric in a suicide bomb attack in the city of Lahore this month, was behind the attack.

The military went on the offensive against Taliban fighters allied with Mehsud in the Swat Valley, northwest of Islamabad, in early May and they are in the final phase of that operation, the army has said.

The offensive in Swat came after Taliban gains raised fears for the future of nuclear-armed Pakistan, a vital ally for the US and other the Western nations involved in military operations against al-Qaeda in Afghanistan.

In recent days, the military has been launching air strikes on Mehsud's bases while soldiers have been securing the main road into the mountainous region populated by ethnic Pashtun tribes.

The US has offered a reward of more than £3 million for information leading to Mehsud's location or arrest.

In the southern city of Karachi, police said they had arrested five of Mehsud's men involved in bank robberies and kidnapping to raise money for the Taliban.

The fighting in Swat sparked an exodus of hundreds of thousands of civilians and aid workers fear a flow of villagers out of South Waziristan when fighting intensifies there.

Nearly two million people have fled fighting in the northwest, most since the army pushed into Swat in May, and another 40,000 or more have fled from South Waziristan even before the offensive there begins.

The United Nations is appealing for more than £333 million in aid to avert a long-term humanitarian crisis but has received only 35 per cent of that.

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