Armed masked gunmen have attacked at Thai school bus near the border with Burma, killing at least two students and leaving some 15 others wounded, and the Thai military and police have launched a massive manhunt for the killers.

At least three masked gunmen armed with assault rifles attacked the Thai school bus early Tuesday morning near the Burmese border. The attackers later fled into the surrounding foothills.

A Thai Defense Ministry spokesman, Major General Supaluck Suvarnajata, says hundreds of soldiers and police are searching the area.

"The incident happened within the Thai territory some 20 kilometers within our border," said the general. "So the first authority should be the police, the Ministry of the Interior and then the Ministry of Defense; we co-operate and try to find out what happened down there."

General Supaluck says it is not yet clear who was behind the attack. But authorities say the gunmen wore masks and jungle fatigues similar to those worn by Burma's ethnic Karen rebels.

The main Karen rebel group, the KNU, has denied responsibility. But other Karen guerrillas have in the past launched attacks inside Thailand.

Tuesday's deadly incident comes amid heightened border and diplomatic tensions between Thailand and Burma. The problem flared in May when Burma accused the Thai military of firing into its territory to support ethnic Shan separatist rebels. Bangkok denied the charge, saying its soldiers fired warning shots after shells crossed over into the Thai side of the border.

Since then there have been a series skirmishes.

Burma's military government has closed several border checkpoints and has mounted a propaganda campaign accusing Thailand of working with rebel groups to destabilize Rangoon.

Tuesday Burma warned it is preparing a major assault on Shan rebels near the border and warned the Thai military not to interfere.

Thai Prime Minister Thaksin Shinawatra has called for calm and high-level talks to ease tensions. Burma has yet to respond.