In an unusually brazen attack, up to 100 insurgents stormed a military base in the province of Narathiwat.
Colonel Pramote Promin, a military spokesman, has told Thai television the army was tipped off about the raid and suffered no casualties of its own.
"We learned of the attack in advance from defected militants," he said.
"We were able to secure the camp. All of our force are safe."
The militants were armed with M16 and AK47 rifles and were wearing bulletproof vests.
A combined force of about 100 military and police officers are in pursuit of the 70 militants who fled from the base after the attack.
A key local insurgent leader was apparently one of those killed.
Members of Thailand's security forces are frequently targeted in ambushes and roadside bombs, but organised attacks on military bases are relatively rare.
More than 5,500 people have died in the three southern-most provinces of Thailand since the push for regional autonomy began near the Malaysian border in 2004.
The attack follows an announcement from the government that it's sending some 2,700 territorial defence volunteers to the region.
Prime Minister Yingluck Shinawatra has indicated the force will be dispatched as soon as possible and will work closely with the southern authorities.
Dr Nicholas Farrelly from the Australian National University's College of Asia and the Pacific has told Radio Australia's Connect Asia program that this is unlikely to be the last report of violence in the region.
"The much deeper and graver concern, after such an incident, is that this is likely not be the end," he said.
"In fact, if the current escalation trajectory in southern Thailand holds, then we're likely to be hearing similar reports again sometime soon."