Security officials said the attack took place in the Mizrana forest in the Kabylie region, around 100 kms east of the capital Algiers.
The Salafist Group for Preaching and Combat (GSPC), an Islamist opposition group battling the Algerian government, is known to operate in the area.
The same group was also blamed for the abduction of European tourists in the Sahara desert some months ago. The tourists were finally released last month amid reports of ransoms being paid to the hostage-takers.
According to estimates based on officials and press reports, at least 32 people have been killed in Algeria since the start of August in violence involving Islamist fighters.
The unremitting fighting has killed an estimated 700 people since the beginning of the year.
Algeria has been in the throes of civil war since 1992 when the government annulled elections about to be won by the Islamist opposition.
Amid the ongoing violence Algeria's president Abdelaziz Bouteflika replaced seven ministers in a major cabinet reshuffle during the day.
Five of the seven sacked minsters were supporters of Ali Benfis, the secretary general of the ruling National Liberation Front (FLN), who is locked in a power tussle with Bouteflika.
Bouteflika sacked Benflis as prime minister in May.
Despite his differences with the president, Benflis has now been relected the FLN leader. The party's central committee this week also proposed Benflis as its candidate for the 2004 presidential elections.
Media reports say Bouteflika is wary of Benflis, since his own ambitions of standing for a presidential re-election next year could be jeopardised by a powerful rival.