Mexico's government has confirmed that 12 bodies found with torture marks along a mountain highway were federal agents investigating organised crime.
The officers had been working in the state of Michoacan, where government forces and a powerful drug cartel have been engaged in a fierce battle.
Monte Alejandro Rubido, Mexico's national security spokesman, said on Tuesday that the 11 men and one woman were off duty when they were ambushed and abducted by members of the La Familia drug cartel in Michoacan.
The attack is one of the highest profile against federal forces since Felipe Calderon launched his war on drugs soon after becoming Mexican president in 2006.
Michoacan, Calderon's home state, has been one of the key battlefields in his crackdown on drug cartels.
The bodies were found piled up along a mountain highway late on Monday near the town of La Huacana.
Initial reports indicated the victims were likely killed over the weekend, when federal agents arrested Arnoldo Rueda Medina, a reputed chief of operations of the Michoacan-based La Familia cartel.
Police say his arrest on Saturday set off a string of brazen attacks against federal forces that left six federal police officers and two soldiers dead.
"This marks an important change in the drug war in that they are attacking federal forces directly," said Jorge Chabat, an expert on the Mexican drug trade.
"It also suggests the capture of this person has affected the operations of the cartel. It was a major blow and this is a reaction out of weakness not strength."
Calderon blasted what he called the "cowardly attacks" and declared that "the criminals will not be able to intimidate the federal government".
"In this battle we will not give up, we will not hesitate, because what is at stake is Mexico's peace and safety."
Federal forces arrested politicians in several Michoacan cities, including La Huacana, during an unprecedented sweep in May against officials believed to be co-operating with drug cartels.
Seven mayors, one former mayor and the state prosecutor remain in prison on charges of protecting the La Familia cartel.
An arrest warrant for alleged links to La Familia has also been issued for Julio Godoy, the half brother of Leonel Godoy, the Michoacan state governor, and a federal legislator for the leftist Democratic Revolution party.
Julio Godoy, who has gone into hiding, is allegedly one of several people in charge of seeking government protection for the cartel, national security spokesman Rubido told a news conference in Mexico City on Tuesday.