The incident occurred as Thai Muslims began their observance of the holy fasting month of Ramadan on its first day Sunday.
Police said that at least 10 insurgents divided into three groups fired at the officers as they patrolled Narathiwat’s Tak Bai district, killing two police officers instantly.
The surviving officers called for reinforcements.
Gunfire continued for 20 minutes before the insurgents left, police said, adding that they believed some insurgents might have been wounded.
Police later moved into the scene of fighting and found two villagers had been wounded in the crossfire.
The authorities were searching for wounded insurgents and inspected hospitals which they believed the insurgents might have visited for treatment.
In nearby Songkhla province, Somchart Pimthanapoonporn, president of the Hat Yai-Songkhla Hotels Association, said that more than 70 per cent of hotel rooms in Hat Yai district were booked by non-Muslim from Malaysia during a four-day holiday in that country, starting last Thursday.
The tourists opted to spend holidays in Hat Yai before Ramadan started, enabling the atmosphere in the district to become very lively, said Mr Somchart.
It is expected that Malaysian tourists will visit Hat Yai again, as it is known as a shopping paradise in the deep South, after Ramadan ends.