Local police chief Listyo Sigit Prabowo said the shootout occurred today in Banten province when a counterterrorism squad ambushed four suspected militants on the outskirts of Cilegon city.
Prabowo told TVOne that police fired on the group after they tried to run down officers with a car.
Muslim-majority Indonesia has carried out a sustained crackdown on militants since 2002, when bombings on the tourist island of Bali by al-Qaida-affiliated radicals killed 202 people.
A new threat has emerged in the past several years from Islamic State group sympathisers.
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