"Several thugs" threw explosives late last night and attacked policemen, who were pursuing suspects in Shufu county, near the city of Kashgar, located close to Pakistan-occupied Kashmir (PoK).
In the clash that ensued, two police officers died and 14 "thugs" were shot and killed, Tianshan Net, the region's official news portal, said. It described what happened as a "terrorist attack".
Xinjiang, home to the Muslim Uighur minority group, sees sporadic clashes.
Verifying reports from the region is difficult because the information flow out of Xinjiang is tightly controlled.
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The government traditionally blames extremists for the violence, while Uighur activists point to ethnic tensions and tight Chinese control as triggers for violence.
Last month, state media reported nine civilians and two policemen were killed in an attack on a police station near Kashgar.
In late October, five people were killed when a car ploughed into a crowd and then burst into flames in Beijing's iconic Tiananmen Square.
The arrival of waves of the majority Han Chinese people over the decades has fueled tensions with the Uighur minority group. Chinese authorities have cracked down heavily on violence involving Uighurs, deepening resentment.
The Tianshan report did not specify the ethnicity of the people involved in the clash with police.
Xinjiang's worst violence in decades took place in July 2009, when rioting in the capital, Urumqi, between Uighurs and Han Chinese killed some 200 people and injured 1,700. That unrest was followed by a crackdown by security forces.