The militants, riding pick up trucks and motorcycles, arrived at the Buddhist village in Rueso district of Narathiwat province on Tuesday evening and shot dead a young man and an elderly woman, wounding two others.
They also started a fire-fight with nearby military, leaving a 24-year-old soldier dead and four others wounded, an army spokesman said, adding he believed the attacks were in a response to a recent blitz on the insurgents' leadership.
"Some 25 militants opened fire at the (military) outpost and villagers' homes simultaneously," according to Colonel Pramote Prom-in, spokesman for the army in the southern region.
Pramote said he could not confirm reports that militants were also killed in the clash.
Authorities say militants are likely to stage a large-scale attack ahead of holy month of Ramadan -- which starts on Friday.
A shadowy insurgency, without clearly stated aims, has raged in Thailand's three southernmost provinces -- Pattani, Narathiwat and Yala -- since 2004.
Near-daily bomb or gun attacks have targeted both soldiers and civilians, Buddhists and Muslims, and have claimed more than 5,000 lives in eight years.
A state of emergency is in force in the worst-affected parts of the region, which rights campaigners say in effect gives the tens of thousands of military troops based in the area legal immunity and fuels rights abuses.