YAOUNDE/MAIDUGURI, Nigeria Nigerian security forces surrounded the kidnappers of a French family in northeast Borno state on Thursday in an operation to rescue the hostages, a Nigerian military source said.
French, Nigerian and Cameroonian officials earlier denied French media reports that the family, who were seized in Cameroon and taken over the border, had been freed.
The Nigerian military located the hostages and kidnappers between Dikwa and Ngala in the far northeast, the military source in Borno said, asking not to be identified.
Dikwa is less than 80 km (50 miles) from the border with Cameroon where the three adults and four children were taken hostage on Tuesday.
A senior Cameroonian military official declined to comment saying the matter was too sensitive.
Citing a Cameroon army officer, French media reported earlier on Thursday that the hostages had been found alive in a house in northern Nigeria.
"This is a crazy rumor that we cannot confirm. We do not know where is it coming from," Cameroon Communications Minister Issa Tchiroma Bakary told Reuters by telephone from the capital Yaounde.
"What is certain is that the French tourists who were abducted are no longer on our territory. However, we are in touch with the Government of Nigeria to intensify measures to continue the search for them along our common border," he said.
French gendarmes backed by special forces arrived in northern Cameroon on Wednesday to help locate the family, a local governor and French defense ministry official said.
Nigerian military spokesman Sagir Musa earlier also said the report on France's BFM television of the hostages being released was "not true," while Didier Le Bret, the head of the French foreign ministry's crisis center, said the information was "baseless."
The abduction was the first case of foreigners being seized in the mostly Muslim north of Cameroon, a former French colony.
But the region - like others in West and North Africa with porous borders - is considered within the operational sphere of Boko Haram and fellow Nigerian Islamist militants Ansaru.
On Sunday, seven foreigners were snatched from the compound of Lebanese construction company Setraco in northern Nigeria's Bauchi state, and Ansaru took responsibility.
Northern Nigeria is increasingly afflicted by attacks and kidnappings by Islamist militants. Ansaru, which rose to prominence only in recent months, has claimed the abduction in December of a French national who is still missing.
Three foreigners were killed in two failed rescue attempts last year after being kidnapped in northern Nigeria and Ansaru, blamed for those kidnaps, warned this could happen again.
The threat to French nationals in the region has grown since France deployed thousands of troops to Mali to oust al Qaeda-linked Islamists who controlled the country's north.
The kidnapping in Cameroon brought to 15 the number of French citizens being held in West Africa.
(Reporting By Emile Picy and Nicholas Vinocur in Paris; Additional reporting by Joe Brock in Abuja and Bate Felix and John Irish in Dakar; Writing by Bate Felix and John Irish; Editing by Angus MacSwan)