At least two soldiers were killed when the firefight first broke out at dawn near the town of Alleroy on Sunday, after a remote-control bomb exploded in front of a military column, a spokesman with the Russian Interior Ministry said.
Four soldiers were wounded and taken to a hospital at a Russian military base north of the capital Grozny, he said.
Following the explosion, the column was bombarded with grenades and returned fire, he said.
By Tuesday morning, about 1500 soldiers had been sent to the area to crush the 40 fighters the military said were holed up there.
The Russian military said three soldiers and 13 fighters were killed, but the separatists said six soldiers and two fighters died in the fighting.
Access to the area has been barred.
The town of Alleroy is the birthplace of Aslan Maskhadov, a separatist commander who fought Russian forces during the first Chechen war in 1994-1996, and who was elected president of a de facto independent Chechnya in 1997.
Since Russian troops poured back into Chechnya in October 1999, Moscow has labelled Maskhadov a “terrorist” and refused to talk with him.
The fighting takes place just days in advance of a Kremlin-organised presidential election in the republic, which Moscow is touting as proof that the bloody conflict in the republic is over.