MANILA, Philippines, April 12 (AP) - The Philippine military rescued U.S. hostage Jeffrey Schilling on Thursday from Muslim separatists who threatened to behead him, military officials said.

Brig. Gen. Diomedio Villanueva, in charge of a 10-day series of assaults on Abu Sayyaf rebels on the southern island of Jolo, said the 25-year-old Oakland, California, resident was in good shape.

``We are giving him medical attention,'' Brig. Gen. Romeo Dominguez Villanueva said. ``He is in good health.''

Schilling, a Muslim convert, was taken hostage when he visited the rebels' camp on Jolo on Aug. 31 with his wife, Ivy Osani. Osani, cousin of one of the rebels, was not held.

The Abu Sayyaf, the smallest of the three major insurgency groups in the Philippines, shot to international notoriety last year after seizing dozens of hostages, many of them foreigners, in daring raids. It released all but Filipino dive resort worker Roland Ulla for reported multimillion-dollar ransoms.

The Abu Sayyaf claims it is fighting for a separate Islamic state in the southern Philippines, but the government regards it as a bandit gang.

Arroyo said her government will not hold peace talks with the group as it plans to do with the Muslim secessionist Moro Islamic Liberation Front and the communist National Democratic Front.

The U.S. Embassy welcomed Schilling's rescue and praised the military.

``The U.S government is thrilled with the news of Mr. Schilling's safe release and has expressed its deep appreciation to Arroyo and Gen. Villanueva for their valiant efforts over the past 7 1/2 months to free Mr. Schilling,'' an embassy statement said. ``The embassy has been informed that Mr. Schilling is in 'pretty good shape' and will be returning to his family in the U.S. shortly.''

The government launched ``all-out war'' against the rebels on Jolo on April 2, after they said he would be killed and his head sent to President Gloria Macapagal Arroyo as a birthday present.

The Abu Sayyaf had threatened to kill Schilling several times earlier, but this threat was the most specific.

It prompted Schilling's mother to fly in from Oakland to make a personal plea for his release.

Minutes before the deadline a week ago, she was hooked up by a radio station to the Aby Sayyaf leader holding her son. He said the execution was postponed but that Schilling could be killed at any time if the government did not call off the military.

The offensives continued on the jungle-covered island about 940 kilometers (580 miles) south of Manila.

``This is a fight to the finish,'' Dominguez said.