The victims were all aged between 15 and 20.

"The men drove up in SUVs, they were well-armed," a neighbour at the scene said.

"They went into the house and shot at everyone, you could hear the gunfire all around."

Enrique Torres, a Mexican army spokesman, said all the victims were aged between 15 and 20, and were high school and college students.

"They were about 15 men, they closed off the surrounding streets and began shooting at the house as they moved inside," he said.

City officials have offered a reward of $76,000 for information leading to the arrest of the gunmen.

Drug violence

Over the past two years, hitmen have attacked a series of gatherings in Chihuahua state searching for rivals, and police have reported that some teenagers in Ciudad Juarez have been involved in kidnapping others.

"We have two lines of investigation and one of them is linked to drug trafficking"

Patricia Gonzalez, Chihuahua state attorney-general

The city is the bloodiest front in Mexico's three-year drug war as rival groups fight over markets and control of smuggling routes into the US.

Violence is escalating even as federal police and soldiers patrol the streets.

Patricia Gonzalez, attorney-general for Chihuahua state that includes Ciudad Juarez, told a news conference that the shooting could be drug-related.

"We have two lines of investigation and one of them is linked to drug trafficking," she said.

"We know from witnesses that the men arrived looking for someone."

Some 2,650 people were killed in drug violence in Ciudad Juarez last year and drug-related murders have jumped since the start of 2010.

Meanwhile a police station in the Mexican community of Lazaro Cardenas was also attacked early on Sunday.

Officials say heavily-armed gunmen riding in trucks threw grenades and fired assault rifles at the outpost, killing three people – a police officer, and a mother and her son who had come to pay a fine.