"While trying to convince them, he was taken into custody or held hostage but he kept on convincing them until he succeeded," Interior Secretary Mar Roxas and police officials told a news conference Tuesday.
The rebels said they had come from a nearby island for a peaceful protest in Zamboanga but withdrew after firefights erupted between government troops and their comrades, Roxas said, adding police would investigate their claims.
"The important thing here is he (Malayo) was able to enact the surrender," military spokesman Lt. Col. Ramon Zagala said.
The military says it has recaptured 70 percent of the coastal areas occupied by the rebels.
About 64 hostages were freed or escaped during military operations early Tuesday, followed by another 14 who walked to freedom in separate batches. That brought to 116 the number of those rescued in the last 18 hours, Zagala said.
He said more than 100 MNLF rebels were still holding an unknown number of hostages in the remaining pockets they control in five coastal villages in Zamboanga.
Nearly 82,000 residents have fled the fighting into several emergency shelters, including the city's main sports complex.
President Aquino has been in Zamboanga, about 860 kilometers (540 miles) south of Manila, since Friday.
The MNLF, led by Nur Misuari, signed a peace deal in 1996, but the guerrillas did not lay down their arms and later accused the government of reneging on a promise to develop long-neglected Muslim regions in the south of the predominantly Roman Catholic nation.
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Associated Press writers Jim Gomez, Teresa Cerojano and Hrvoje Hranjski in Manila contributed to this report.