The online news site Khonumthung Burmese said the attack on Kalay began before dawn.
Videos on the site included what appeared to be sounds of rifle fire, high-calibre weapons and grenade explosions.
Posts on social media said rocket-propelled grenades were used in the attack, but provided no evidence.
Anti-coup protesters burn a Chinese flag (AP)
The news site said that in addition to the seven fatalities, many people were wounded and arrested in the town, also known as Kalemyo.
Over half the town’s population are members of the Chin ethnic minority.
Security forces have killed at least 581 protesters and bystanders in their crackdown on protests against the February 1 coup that ousted the elected government of Aung San Suu Kyi, according to the Assistance Association for Political Prisoners, which monitors casualties and arrests.