A crackdown on the Salafist Group for Preaching and Combat (GSPC) by the armed forces and state-armed militias started two weeks ago and is still going on in the province of Setif, 300km (190 miles) east of Algiers, the El Watan newspaper said, citing military sources.
It said several women and children including babies, believed to be members of the rebel families living in the hideouts, were found during the operation.
The newspaper said 105 rebel bodies were found burnt to ashes in caves after an intense artillery bombardment.
Officials were not available to comment on the report.
The armed forces have in recent months stepped up a campaign to eliminate what remains of the GSPC and the Armed Islamic Group.
Earlier this week El Watan reported that the government offensive had killed 15 members of GSPC.
Last October, military officials said the group had 400 fighters. In August Algeria's interior minister said only a few pockets of rebels were left.
Algeria's decade of violence began in 1992 when authorities cancelled elections that a Muslim party, the Islamic Salvation Front, was poised to win and its supporters took up arms to realise their victory.
Well over 100,000 people are estimated by the authorities to have died, while rebel groups have put the figure at 400,000.