The dead men were found yesterday next to a hand-lettered sign in which a drug cartel claimed responsibility for the killings.
The Michoacan state prosecutors' office said in a statement that the bodies found in the city of Uruapan had bullet wounds.
Photos showed the men's heads were wrapped in what appeared to be packing tape and their hands were tied behind their backs.
A sign left next to the bodies made an apparent reference to the New Generation drug cartel: "We are here now, and we are here to save you, Respectfully, the Michoacan New Generation Cartel."
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The Knights Templar gang was partly expelled from Michoacan by an armed vigilante movement and the Jalisco gang appears to be trying to move in.
In another part of the state, prosecutors reported finding the body of Aquiles Gomez, the brother of the Knights Templar's top remaining leader, Servando Gomez alias "La Tuta," or the Teacher. The body was found with a bullet wound in the Pacific coast port city of Lazaro Cardenas.
Servando Gomez remains at large and is believed to be hiding in the mountains of Michoacan.
Despite those efforts, many people in Michoacan say the security situation remains grim.
"It is hasn't improved; this has all been cosmetic," writer and activist Homero Aridjis said. "There has been a political strategy, of declaring this (the security crisis) is over by decree."
Aridjis said some parts of the largely agricultural state have come to resemble the wild west, with roving bands of thieves stealing horses and cattle from farm families.