Indian security forces (File Photo: AFP)
"The situation in the entire Mon district is very tense right now. We have 13 confirmed deaths which include one labourer from outside Nagaland," said state police officer Sandeep M. Tamgadge of Saturday's incident.
Tamgadge said six labourers were killed while returning to their homes in Oting village by security forces that had set up an ambush.
Family members later went looking for the missing men and confronted security forces after finding the bodies.
"They then went to the local security forces to challenge and question them about the dead," Tamgadge said.
"This is where a confrontation happened between the two sides, and the security personnel fired, killing seven more people," he added.
The Indian army said in a statement it was acting on "credible intelligence" in pursuing insurgents operating in the area.
It added that one member of the security forces was killed in the later incident and others had been wounded.
"The cause of the unfortunate loss of lives is being investigated at the highest level and appropriate action will be taken as per the course of law," the statement said.
Nagaland's chief minister appealed for calm and announced an investigation.
"The unfortunate incident leading to killing of civilians at Oting, Mon is highly condemnable," he said on Twitter. "Appeal for peace from all sections."