There are reports of exchanges of gunfire between the two sides Police in the Brazilian city of Rio de Janeiro have urged drug traffickers in a hillside slum to turn themselves in or face a determined assault.
Hundreds of police officers and soldiers, some in armoured vehicles, have surrounded the Alemao favela.
Authorities say the operation aims make the city safer ahead of the World Cup in 2014 and Olympic Games in 2016.
Drug gangs have fought back over the past week, firing on police and setting fire to cars and buses.
Dozens of people – many of them suspected drug traffickers – have died in the violence.
“There is not the slightest chance traffickers can win in this war in Alemao,” military police chief Sergio Duarte told reporters.
“We are in position to invade Alemao at any moment. It’s better they give themselves in now and bring their weapons while there’s still time, because when we invade, it’s going to be more difficult.”
The suspected traffickers fled to Alemao from the Vila Cruzeiro favela after police took control of it earlier this week.
Reuters news agency reports that police are now searching vehicles and pedestrians entering Alemao, and two men have been arrested after trying to flee the area.
There are reports of exchanges of gunfire between the two sides.
Human rights organisation Amnesty International accused police of being too heavy-handed.
“The police response has put communities at risk,” said Brazil researcher Patrick Wilcken.
“The authorities must ensure that the security and well-being of the broader population comes first and foremost in any operation carried out in residential areas.”
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