Pakistani security forces raided and captured the boys' madrassa run by the radical clerics of the Lal Masjid and took into custody a large number of students.
A series of massive explosions and gunfire rocked the area around the besieged mosque complex creating panic among people in the Pakistani capital.
Jamia Faridia madarassa, which had over 3,000 students on its rolls, was taken over late Friday night by the security forces.
This was after a series of deafening explosions in areas near the Masjid complex, where several hundred militants led by deputy head of the mosque Abdul Rashid Ghazi are holed up and engaged in a tense stand-off with security forces, witnesses and media reports said.
The madrassa is located in a posh area in the capital and is about 4 kms from the mosque.
A large number of students were also taken into custody. Most of the boys of the madrassa, however, are believed to have been holed up in the Lal Masjid along with Ghazi and other militants.
Jamia Hafsa, the girls' madrassa, is attached to the mosque which is located in another posh area of the city.
Jamia Faridia, the boys' madrassa, was allegedly constructed on illegally acquired land at the foothills of picturesque Margala Hills.
According to Ghazi, the two madrassas housed poor children numbering about 7,000.
For the past seven months, the city witnessed students of the two madrassas indulging in moral policing. They hit the headlines after abducting a police patrol two months ago to demand release of some detained boys.
When Pakistan government deployed paramilitary Rangers at the Lal Masjid leading to the confrontation on July 3, Jamia Fardia remained open.
It was only later when heavy contingents of police encircled it, many students reportedly fled and joined Ghazi brothers in the main mosque.
Before Fardia was raided and captured, large explosions which could be heard kilometres away created panic among people all round the capital.
While some reports said the explosions took place in the Masjid complex, Geo TV said they occurred in three localities away from Lal Masjid.
There were also reports that some of the heavily-armed students holed up in the mosque were firing their out way in the darkness.
Gunfire was also heard deep in a sector close to the ISI headquarters, frightening residents.
The incidents took place a few hours after a delegation of MPs of Islamic alliance Muttahida Majlis-e Amal were permitted by the government to go to the Lal Masjid to talk to Ghazi and work out modalities to end the stand-off.
After repeated appeals made through the public address system to Ghazi to surrender, MMA members reassembled on Saturday to make a fresh bid to hold talks with him and his associates.
On Friday night security agencies kept shelling the besieged complex even during an hour-long heavy rain spell and storm that hit the city.
'Hundreds of bullets and mortar shells were fired at the walls and main gate of the Jamia Hafsa to expose the inner scene of the complex so that the activities of the miscreants holed up inside can be monitored', The News quoted a security official as saying.
Private TV channels reported that the militants in Lal Masjid resorted to intense firing when security forces launched an attack at 1:20 am local time on Saturday morning. It was followed by a series of blasts around Lal Masjid. The loud blasts could be heard till 2:00 am.