An elite anti-terrorism police squad killed six suspected militants and arrested another during an extended standoff at a house near the Indonesian capital, a police spokesman said.
Intelligence gathered from earlier arrests allowed police to storm hideouts in Ciputat on Jakarta's outskirts as part of an investigation into an alleged plot to bomb the Myanmar Embassy and a Buddhist temple, said National Police spokesman Brig. Gen. Boy Rafli Amar.
The nine-hour shootout started late Tuesday when most Indonesians were preparing to celebrate New Year's and ended Wednesday.
Amar said those killed had refused to surrender and had fired guns and lobbed homemade bombs at security forces, injuring one police officer in his leg.
He added that the fatal attack was inevitable since calls for the suspects to surrender were met with gunfire and explosions.
Human rights groups have criticized the US-funded squad, known as "Densus 88" in the past, saying it was not trying to take suspects alive, a trend seeming to fuel the very extremism the predominantly Muslim country is trying to counter.
The critics alleged that the suspected militants were victims of extrajudicial killings that drive militancy and reduce public sympathy for police.
Amar said the men were suspected of being part of a larger group involved in robberies used to fund terrorist activities, mainly aimed at police.
They also were linked to terrorist group led by Abu Wardah Santoso - on the police's most wanted list - in Poso, a flashpoint of terrorism in Central Sulawesi where a Muslim-Christian conflict killed at least 1000 people from 1998 to 2002.
"There is a strong indication that they were involved in a series of police killings," Amar told reporters, adding police found at least six homemade bombs at the house.
Police also confiscated five pistols and a revolver, 200 million rupiah ($16,500) in cash, and materials used for making bombs.
Police were trying to determine whether the men killed in the raid were connected to an alleged plot in May against the Myanmar Embassy to retaliate against Myanmar for attacks on Muslims in that country.
"There are also printouts of addresses of about 20 to 30 Vihara (Buddhist temples) we believed to be their targets," Amar said.
In August, a small bomb exploded outside a Buddhist temple packed with praying devotees in Jakarta. One person was injured, but two other devices failed to explode.
Officials have said the attack appears to have been meant to avenge the deaths of Muslims in Myanmar.
Religious violence in Buddhist-majority Myanmar has killed scores of people, and tens of thousands of Muslims have been driven from their homes.
Amar said at least nine suspects were arrested in past two weeks, including one in Central Java whose interrogation led to the latest raid.
Indonesia, the world's most populous Muslim nation, has been battling terrorists since bombings on the resort island of Bali in 2002 killed 202 people, mostly foreign tourists.