Defense Department spokesman Bogita Ongeri declined to give details, saying only troops were in the area to assist local officials.
Ochiemo Cheptai, who identified himself as chairman of the Mount Elgon chapter of the Kenya Red Cross, says 30,000 people fled their homes.
Cheptai said the army began pursuing members of the Sabaot Land Defense Force on Sunday, bombing several villages in the Mount Elgon area where militants were believed hiding.
Red Cross officials in Nairobi were challenging the 30,000 figure, saying they have not yet assessed the numbers fleeing.
Local lawmaker Fred Kapondi says people are fleeing "aerial bombing and harassment from the army." Mohamud Birik, the local district commissioner, denies the army is targeting villagers.
The violence is the latest tragic turn of events for the African nation already reeling from a disputed election last December that sparked political unrest across the country.
President Mwai Kibaki and opposition leader Raila Odinga both claimed to have won the country's Dec. 27 presidential election, but local and international observers said the results were manipulated, making it unclear who actually won.
In addition to eviscerating the nation's robust economy, the violence killed more than 1,000 people and made 300,000 homeless - among them 12,000 Kenyans Ugandan authorities said had crossed the border.