Bali police shoot five terrorism suspects

Indonesian police stand next to statues of Buddha near Kerobokan prison in Denpasar, Bali. Photo / AP

Indonesian counter-terrorism forces have shot dead five suspected militants believed to have been planning a series of attacks in Bali.

Heavily armed officers from Indonesia's crack anti-terror unit Detachment 88 stormed two separate addresses, in Denpasar and in Sanur, on Sunday night where they shot and killed five men.

Witnesses have told AAP that gunshots could be heard for several minutes as officers raided the Lhaksmi Hotel on Jalan Danau Poso in the Sanur area about 9pm local time.

"I heard more than 10 shots. We are not allowed to enter our homes," one witness, who only wanted to be identified as Egi, told AAP.

Three suspected terrorists were shot and killed at the address in Sanur, an area popular with foreign tourists.

Witnesses reported seeing police removing bodies from a bungalow at the hotel, which remained surrounded by heavily armed officers late on Sunday night.

Another two suspected terrorists were shot and killed during a raid at an address on Jalan Gunung Soputan in Denpasar.

Police confirmed the raids were linked, adding that those killed had either resisted arrest or tried to escape.

"On Danau Poso three people were killed from police fire and on Gunung Soputan two were shot dead," Bali Police spokesman Hariadi said.

"They are linked to terrorism."

A number of firearms and ammunition were recovered from both addresses but Hariadi refused to confirm if any explosives were discovered at either of the locations.

Hariadi added that it was believed the group had been planning robberies, to be used to fund terror attacks, but did not provide further details.

However, another senior police officer, who spoke on condition of anonymity, said it was possible the group was planning to carry out attacks on Thursday, on the eve of Nyepi, or the annual Day of Silence, which marks the Balinese Hindu New Year.

Balinese traditionally hold large parades on the eve of Nyepi, which also draw large numbers of tourists.

The latest development is a stark reminder of the lingering threat of terrorism in Indonesia and comes ahead of the 10th anniversary later this year of the 2002 Bali bombings which killed 202 people, including 88 Australians.

The Jakarta Globe newspaper reported that a police source said that a high-profile terrorism suspect was among the groups raided on Sunday night but would not confirm whether he was one of the five people killed.

It's understood police were also investigating whether members of the groups raided on Sunday were linked to a terrorist network discovered training at a paramilitary camp in Aceh in 2010.

The Aceh camp was set up by Abu Bakar Bashir, the former spiritual leader of Jemaah Islamiyah and the group blamed for the 2002 bombings in Bali.

While Bashir is serving 15 years in relation to his involvement in the Aceh network, a number of members are known to be still at large.

-AAP