Kandhamal SP Pinak Mishra said the exchange of fire took place when personnel from CRPF, SOG and District Voluntary Force (DVF) went to the place after getting information about movement of Maoists in the area last night.
"The villagers travelling in an auto-rickshaw were suddenly caught in crossfire. We have received information about the death of five persons. As the spot is located in a remote forest area we are yet to get detailed information," he said.
S N Murmu, Sub Divisional Police Officer, Baliguda - where the area lies - said three persons in the vehicle were also injured.
Meanwhile, locals blocked Rayagada-Phulbani State Highway protesting against the killing of innocent persons in the encounter.