"The shooting started in a place called Kaldak on Saturday morning, and there was heavy fighting," said Peter Lam Both, information minister for Upper Nile state, speaking from the state capital Malakal. "Around 50 soldiers from Tang-Ginye, and five of his generals were killed."
No SPLA deaths were reported but Both said 34 wounded troops and 43 civilians had been brought to Malakal for treatment.
South Sudan, which is gain full international recognition as an independent state in July, has been hit by several violent rebellions, with at least seven separate militia groups fighting its government.
The UN estimates that more than 800 people have been killed and 94,000 people forced from their homes in fighting since January, when southerners voted overwhelmingly for their own nation in a largely peaceful referendum.
Tang commanded a pro-Khartoum militia during the devastating 1983-2005 civil war between the north and the south, but agreed to join the southern army late last year.
His troops were due to be formally integrated into the SPLA, under an agreement reached last week, with Tang taking the post of Lieutenant-General, Both said.
Saturday’s battle is reported to have started when his fighters refused to follow orders to travel to the southern capital Juba.
Tang's forces were involved in fighting inside Malakal in February, when they fought northern colleagues in a bid to retain heavy weaponry being transferred to the north.
Elsewhere, thousands of civilians are reported to have fled clashes in oil-producing Unity state, next door to both Jonglei and Upper Nile. The rebels and the army each claim to have killed several of their opponents and dismissed each other's reports as lies.
The violence there has also forced the evacuation of 130 northern oil industry workers back to the north.