About 10 hooded gunmen broke into the shack where the gang was staying in the northern town of Bugallon and shot two of the men in the hands and feet, said Senior Inspector Ryan Manongdo, the provincial police spokesman.
The gunmen then beheaded the two wounded men before shooting dead the three others, Manongdo added.
A 14-year-old boy who was related to all five men witnessed the grisly attack but was unharmed, police said.
Manongdo said police were looking into the possibility that the killings were carried out by a family previously targeted by the gang.
One of the dead men had been conditionally freed on parole in April after serving a prison sentence for robbery, Manongdo added.