The shootout in Diyarbakir erupted just six days ahead of elections in Turkey, with tensions running high following the country's worst ever bomb attack and a resurgence of the conflict with Kurdistan Workers' Party (PKK) rebels, AFP reported.
The gun battle is the first with the extremists on Turkish soil, as security forces hunt down suspects behind the October 10 Ankara suicide bombings that killed 102 people at a pro-Kurdish peace rally.
Police had launched dawn raids on several houses in a district of Diyarbakir where the militants were thought to be hiding out when the suspects opened fire, one source said.
The police officers were killed after booby traps planted around one of the houses exploded, according to the Anatolia news agency. Another four officers were injured.
Heavy shooting lasted for at least two hours, an AFP journalist at the scene said, with police fearing other insurgents could be holed up in the area. Three suspects were later arrested.
The authorities have declared ISIL the number one suspect over the Ankara bombings, the deadliest attack in the history of modern Turkey.
Hunt for ISIL Cell
Turkey, which is believed to be among the countries that gave rise to the ISIL terrorist group in the first place, launched airstrikes on ISIL targets in Syria and Kurdish rebels in northern Iraq in July after another deadly bombing and later allowed the United States to use its Incirlik air base for bombardments against the militants.
A massive police hunt was under way at the weekend for a suspected ISIL cell that included a German woman allegedly plotting to carry out other attacks, Turkish media reported.
Anatolia said Saturday that security forces feared the four were preparing a major attack "such as hijacking a plane or a vessel or detonating suicide bombs in a crowded location".