Eyewitnesses told Xinhua the the attackers invaded the town of Bama.
Baba Ali, a member of a vigilance group who witnessed the incident, told reporters in Maiduguri, the state capital, that the invaders drove in heavy trucks into the town through Government Science College in Bama.
"We were lucky that they came through one route so we tried to resist them," Ali said. "But we realised that they were in hundreds carrying sophisticated weapons."
Witnesses: Militants were carrying sophisticated weapons
Ali, who escaped to Maiduguri on foot, said his team of seven men took cover at the nearby Bama General Hospital before fleeing into the bush. He said about 3,000 houses were destroyed by the attackers who operated in groups.
Zanna Shettima, former chairman of the Nigeria Labour Congress (NLC) in the state, also a resident, described the attack as barbaric. Lawan Tanko, the Borno commissioner of police, confirmed the attack, saying he had no details yet.
"I can confirm there was an attack in Bama this morning but we are still collating the data," he said.