PESHAWAR, Pakistan (Reuters) – A U.S. drone killed at least 45 Pakistani Taliban militants on Tuesday when it struck after a funeral of an insurgent commander killed earlier in the day, Pakistani intelligence officials said.

U.S. ally Pakistan officially objects to the strikes by pilotless U.S. aircraft though the attack came as the Pakistani army is preparing an offensive against Pakistani Taliban leader Baitullah Mehsud in South Waziristan on the Afghan border.

The military went on the offensive against Taliban fighters allied with Mehsud in the Swat Valley, northwest of Islamabad, in May and are in the final phase of that operation.

The next target is Mehsud.

"Three missiles were fired by drones as people were dispersing after offering funeral prayers for Niaz Wali," one intelligence official said referring to a Taliban commander who was one of six militants killed in an earlier drone attack.

The army had no information on the attack on the funeral in the remote area under Mehsud's control, a military official said.

Mehsud, an al Qaeda ally accused of plotting the assassination of former prime minister Benazir Bhutto in 2007, had been in the area but was not hurt, a Taliban official said.

The United States has offered a reward of $5 million for information leading to Mehsud's location or arrest.

The offensive in Swat came after Taliban gains raised fears for the future of nuclear-armed Pakistan, a vital ally for the United States as it strives to defeat al Qaeda and stabilize Afghanistan.

The government has ordered an offensive against Mehsud in his South Waziristan stronghold.

The Taliban have responded with a string of bomb attacks in towns and cities and assassinations of opponents.

OPPONENT KILLED

Earlier on Tuesday, a gunman working as a guard killed a rival of Mehsud who had spoken out strongly against the Taliban chief and may have been about to mount a challenge against him.

The murdered militant commander, Qari Zainuddin, was killed in the northwestern town of Dera Ismail Khan, police said. The gunman escaped.

President Asif Ali said Pakistan had to fight to the end and Mehsud was just one "player."

"He's just one actor in the scene and we want to get all the actors," Zardari told Britain's ITV before the drone attack.

In recent days, the military has launched air strikes on Mehsud's bases while soldiers have been securing the main road into the mountainous region populated by ethnic Pashtun tribes.

The Taliban official said the death toll in the attack on the funeral gathering was higher than 45.

"Most of the bodies have been burned," he said by telephone from the region. "We are not allowing anyone to go to the site."

The United States has carried out some 42 drone strikes since the beginning of last year, most since September, killing more than 345 people, including many foreign militants, according to security agents, officials and residents.

The fighting has sparked an exodus of nearly 2 million people and aid workers fear a flow of villagers out of South Waziristan when fighting intensifies there.

Already 45,000 have fled from South Waziristan.

The United Nations is appealing for $543 million in aid to avert a long-term humanitarian crisis but has received only 35 percent of that.

Pakistan is being kept afloat by a $7.6 billion International Monetary Fund loan, underscoring the need for outside help for the displaced.

(Additional reporting by Zeeshan Haider, Faisal Aziz and Hafiz Wazir; Writing by Robert Birsel; Editing by Jon Hemming)