Local media says the Familia Michoacana drug cartel arrived in village demanding extortion payments.
Eight of those killed in the clash in Texcaltitlan, a town located about 65km from the state capital, were suspected to be tied to criminal activities and three were members of the community, the security ministry in the State of Mexico said in a statement on Friday.
State police, which did not identify the gang suspected of involvement in the confrontation, said they were working with the National Guard and other authorities to provide more details on the incident.
Local media said gunmen belonging to Familia Michoacana, a drug cartel blamed for the massacre of 20 people in neighbouring Guerrero state last year, had arrived at the village demanding local farmers pay extortion fees.
Mexico’s drug cartels are known for extorting money from businesses using threats of violence and the Familia Michoacana drug cartel has been active in the region for years.
Footage posted on social media showed fighting break out among several dozen men, with villagers in cowboy hats armed with hunting rifles chasing suspected gang members amid bursts of gunfire. Other footage showed charred bodies and vehicles on fire.
Al Jazeera could not independently verify the footage.