The Ivorian army retaliated almost immediately on Monday with an air strike into the rebel-held northern enclave of the west African country.
The latest escalation in tensions came as President Laurent Gbagbo was in the US on a week-long private visit.
It was a failed coup bid against Gbagbo in September 2002 - by rebels who retain control of the north - that sent Ivory Coast tumbling into conflict.
UN Secretary General Kofi Annan also warned on Monday that Ivory Coast, the world's top cocoa producer, was at a "crossroads" - teetering into instability.
Ivorian military spokesman Colonel Jules Yao Yao said that early Monday morning a "renegade armed group" attacked Ivorian and French military posts in the farming town of Gohitafla.
The settlement is one of several military installations tucked into the confidence zone cutting 400km across the country of 17 million.
Some 4000 French troops have been monitoring a ceasefire since last year, helping to steer the former French colony back towards reconciliation.
Yao Yao spoke of a number of casualties on all sides; five Ivorian troops were killed and four injured, while 15 assailants and two civilians also died.
Another 15 assailants, who had broken into the camp to raid its weapons cache, were arrested.
French military spokesman Lieutenant Colonel Philippe de Cussac said two French soldiers suffered minor injuries but that troops responded "firmly ... taking many losses among their assailants".
The rebel movement swiftly and strongly denied responsibility for the attack.
Rebel military commander Colonel Soumaila Bakayoko blamed followers of coup-plotter Ibrahim Coulibaly, currently on probation in France for a 2003 charge of attempting to destabilize Ivory Coast, for the early morning ambush.
Meanwhile in Abidjan, more than 100 Gbagbo supporters in black T-shirts hurled stones and burned tyres outside the French embassy, a favoured target for activists who blame France for a peace pact that brought the rebels into the very government they tried to overthrow.
The protesters warned they would be back on Tuesday in greater numbers, prompting an announcement from the neighbouring US mission that it would close to avoid being targeted by violence.
French schools said they would also close.