The pre-dawn battle near the remote town of Las Varas started as a firefight between rival drug trafficking gangs, then escalated when police arrived, said Eduardo Esparza of the prosecutor's office for the state of Chihuahua, which borders the United States.
The region is hotly disputed territory for Mexico's drug cartels because its mountainous terrain and proximity to the border make it a strategic corridor for shipping narcotics to the US.
Investigators believe the groups involved in the shootout were "La Linea" -- the armed wing of the Juarez cartel -- and hitmen from the powerful Sinaloa cartel, Esparza told AFP.
It was the latest in a series of deadly clashes between police, rival drug gangs and warring factions within the Sinaloa cartel, which has been in turmoil since its kingpin, Joaquin "El Chapo" Guzman, was extradited to the United States in January.
Last Friday, 17 gunmen were killed in a spectacular shootout with police on a highway in Sinaloa, the northwestern state that is the Guzman cartel's home base.
May was the deadliest month in Mexico since the government began keeping track in 1997, with 2,186 homicides.