A police constable of elite anti-Maoist force Greyhounds was killed and three others were also injured.
The exchange of fire occurred in the forests near Venkatapuram village on Telangana-Chhattisgarh border.
Some top leaders of the Communist Party of India (Maoist) were suspected to be among the slain Maoists.
The incident occurred when police including Greyhounds personnel launched combing operations in the forests following tip-off about the presence of Maoists.
Senior police officials rushed to the scene.