More than 100 police officers raided an remote area of Raman district after receiving a tip that suspected insurgent leader Mana Masaejuenarong, age 35, was hiding there, plotting a new attack.
After one hour of gunfire between officials and insurgents at an unnumbered house in rural Raman, Abdulrorse Dengsamae, 56, surrendered to the police.
The two suspects killed were identified as the reported leader, Mr Mana, and Usaman Waree. An M16 assault rifle and a 9mm pistol were found near their bodies.
Mr Mana was a Narathiwat native with outstanding arrest warrants issued for security cases.
He was alleged to have been involved in many insurgent attacks, including the killing of three Army Rangers, and wounding other a number of soldiers in shooting attacks.
The wounded police officers, both shot in the leg, are hospitalised and in stable condition.