Three members of the Russian security forces and four armed fighters are reported to have died in a shootout during a sweep for armed groups who have threatened to attack the Winter Olympics that begin in Sochi next month.
Wednesday's deadly shootout occurred in a house in the village of Karlanyurt in the Dagestan region of the North Caucasus, according to Russia's National Anti-Terrorism Committee (NAC)
The attack happened on the same day that Russia's Duma, or lower house of parliament, introduced legislation aimed at broadening the powers of security services and boosting their oversight of the Internet, Russian news agencies said.
The NAC said the dead men included a man accused of carrying out a car-bomb attack in the city of Pyatigorsk late last year which killed three people.
Television showed images of grey plumes of smoke rising from the house in Karlanyurt, near the regional capital Makhachkala, which is about 620km east of Sochi.
Five officers were also wounded in what a spokesman called a special operation.
"The bandits ... tried to break through the encirclement, using machine-gun fire and hand grenades," the NAC said.
Police defused two explosive devices at the house where the group battled security forces.
Russia has been on high security alert after two suicide bombings in southern Russia in December.
President Vladimir Putin has staked much personal and political prestige on the success of the Olympics, and put security forces on combat footing in Sochi.
The mostly Muslim North Caucasus region is plagued by bombings and shootings target state and police officials as part of the armed group's fight to create an "Islamic emirate" there.
At least 34 people were killed last month in the suicide bombings in the southern city of Volgograd.
Putin ordered safety measures to be tightened nationwide after the attacks.
About 37,000 personnel are now in place to provide security in Sochi, located on the Black Sea and on the western edge of the Caucasus mountains. The International Olympic Committee has expressed confidence the Games will be safe.
But, underlining the danger of attacks, security forces said on Saturday they had arrested five members of a banned armed group in southern Russia and defused a homemade bomb packed with shrapnel.
The main spokesman for Russia's Investigative Committee, whose responsibilities include looking into bombings and other attacks, appealed to civilians on Tuesday to be more vigilant and help avert the threat of "terrorist" attacks.
The insurgency is driven by a mix of religious fervour and anger among local residents over corruption and strong-arm efforts by appointed, pro-Moscow regional leaders to clamp down on fighters.