Hundreds of Lebanese waving national flags and beating drums sang and danced with exhausted but jubilant soldiers outside a besieged Palestinian refugee camp in north Lebanon yesterday as the military claimed victory in a three-month battle with Islamist militants.

The Lebanese Army said that it had won full control over the coastal Nahr al-Bared camp, 10 miles (17km) north of Tripoli, where it has been fighting militants belonging to the al-Qaeda-inspired Fatah al-Islam faction since May.

The final stages in the worst internal violence in Lebanon since the 1975-90 civil war began before dawn, when the last remnants of Fatah al-Islam made a desperate attempt to break through army lines surrounding the camp. Positions on the eastern and southern ends of the camp came under attack by militants assisted from the outside by a car full of fighters, who opened fire on soldiers.

Three of the attackers in the car were killed and another ten captured, according to military sources. The army said that 32 militants were killed while trying to escape the camp, and two soldiers also died, bringing the total number of troops killed since the fighting began on May 20 to 155. Shaker al-Absi, the group’s leader, was identified by a Fatah al-Islam prisoner as being among the dead.

Lebanese Special Forces units, which have spearheaded the fighting, entered the last Fatah al-Islam strongholds inside the camp, capturing five wounded fighters. The rest appear to have fled or been killed. During the morning Lebanese troops manned road blocks while other soldiers sprayed machinegun fire into the dense belt of banana groves and orange orchards around Nahr al-Bared. Helicopters clattered overhead as the hunt for the militants intensified and the army called on nearby villagers to join the search.

Although the fighting in Nahr al-Bared has subsided, the origins of Fatah al-Islam remain unclear nine months after it burst on to Lebanon’s volatile political scene. The American-sup-ported Lebanese Government says that it is a creation of Damascus, a mix of jihadist veterans from Iraq and pro-Syrian Palestinians dispatched into Lebanon to sow chaos. The Opposition maintains that the group was funded by leading Lebanese Sunni political supporters of the Government as a bulwark against Hezbollah, the powerful Shia militant group.

Either way, Fatah al-Islam’s presence in Nahr al-Bared has triggered the worst internal violence in Lebanon since the civil war.

In a country beset by bitter political divisions, many Lebanese have rallied in support of the army, the one state institution that appears to have risen above the factionalism that has paralysed Lebanon for months. That public support has been augmented by a promotional campaign of television adverts and billboards boosting the army’s image. In one television spot a Lebanese soldier walks down a main street in Beirut as passers-by stop and salute him. Banks are offering credit cards in a military camouflage design.

Weeks of intense artillery shelling have reduced most of the coastal refugee camp – previously home to 40,000 Palestinians – to piles of rubble.

Red-and-white Lebanese flags flutter from the ruins, planted by Lebanese soldiers as they inched through the warren-like passageways of the camp, dodging snipers and booby-traps and fighting close-quarter battles with the militants.

“They are good fighters, I’ll give them that. Most of them have fought in Iraq,” said Ahmad, a burly Special Forces soldier eating a falafel sandwich in a café on the edge of the camp. The ill-equipped and overstretched army has received airlifts of additional artillery and tank ammunition from the US and Gulf countries. Even Syria has supplied artillery rounds.

In an attempt to bolster the Government of Fouad Siniora, the Prime Minister, Washington has earmarked $270 million (£135 million) in military financial assistance to Lebanon for this year – a 550 per cent increase from 2006.

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