Gunmen on Friday opened fire on a busy market in a restive area of northeast India, killing 12 people and wounding several others, police said.

One of the men was killed by security forces after the attack, said Mukesh Sahay, director general of police for Assam state, where the attack took place.

"Extremists attacked unarmed people in a marketplace. Some 12 people have lost their lives," said Sahay.

The attackers also used a grenade, setting off a fire at a building in the marketplace which was packed with shoppers, he said.

The state government said police and paramilitary reinforcements had been rushed to the scene in Balajan, around 220 kilometres (140 miles) west of Assam's main city of Guwahati.

It was not immediately clear who was behind the attack which took place in a remote part of Assam near the border with Bhutan that is home to the indigenous Bodo people.

They waged a decades-long violent campaign for a separate homeland that has died down in recent years, but tensions with other communities in the area persist, particularly over land ownership.

In 2014 thousands of people fled the area after a series of coordinated attacks by armed rebels that left at least 69 people dead, 18 of them children.

"It is very unfortunate because peace had actually returned to entire Bodoland area in Assam," said junior home minister Kiren Rijiju after the latest incident.

"We have to ascertain that who are exactly the people behind this dastardly act, it is very unfortunate so many people lost their lives."