The militants carried out a rocket attack on an army post, killing five soldiers, while 10 Islamists reportedly died in an army counter-attack.
A BBC correspondent in Algeria says this is the most serious Islamist attack for several months.
They are thought to belong to a group now renamed "al-Qaeda in the Maghreb".
Earlier this week, the Salafist Group of Preaching and Combat (GSPC) announced that it had changed its name.
This latest clash comes amid repeated calls by the army to the general population to help them in their fight against armed militants.
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