The bodies were found at Jijel, 360 kilometres east of the capital Algiers, when troops raided a cave network in search of insurgents, killing five of them, police said in a statement.
Government forces were hunting down extremists, still holding out in attempts to continue a long-running civil war, when they uncovered the bodies.
It was believed the victims were family members killed in order to prevent them from talking to the authorities.
On Wednesday security sources said that 10 suspected militants were killed by the army in the Jijel area in an attack on an insurgent hideout.
The alleged Islamic radicals were identified by the security source as belonging to the Salafist Group for Preaching and Combat (GSPC).
The GSPC, considered close to Al-Qaeda, has rejected a presidential reconciliation charter which offers to pardon armed Islamists who have not committed blood crimes and are still underground.
Under the charter, several thousand Islamic extremists have already been released from prison.
Despite its implementation, violence has continued and the state of emergency, in force since February 1992, has not been lifted.
The civil war, sparked by the annulment of the 1991 elections' first round in which Islamists were leading, has claimed more than 150,000 lives since 1992.
The conflict effectively ended with a government victory, following the surrender of the Islamic Salvation Army and the 2002 defeat of the Armed Islamic Group. However, low-level fighting still continues in some areas.
More than 45 people have been killed since the start of May and at least 161 since the start of this year, according to various tallies.