The assault took place at dawn during a military vehicle patrol in the town of Tinzaouatine, near the border with Mali, local media reported.
The attackers also stole weapons and communication devices, and set the vehicles alight, the source said.
It is the most deadly attack so far this year in Algeria.
Armed Islamic groups in Algeria have linked themselves to al-Qaida to stage bombings and other attacks.
Algeria was riven with violence after the 1992 general election, won by an Islamist party, was annulled.
More than 150,000 people died, but an amnesty in 1999 led many rebels to lay down their arms.
Political violence in Algeria has declined since then, but Islamic groups continue to carry out sporadic attacks.
Source: BBC
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