"There were men, women and children, more than 20 killed," minister at the presidency Mengot Victor Arrey-Nkongho told public radio. "It's intolerable."
The overnight assault occurred at Egbekaw village in western Cameroon — the scene of deadly clashes between rebels and government forces for seven years.
No group has claimed responsibility for the attack.
Cameroon's primarily English-speaking northwest and southwest regions have been gripped by conflict since separatists declared independence in 2017.
It followed decades of grievances over perceived discrimination by the Francophone majority.
In the middle of the night "terrorists" opened fire with guns and used "traditional arms," Manyu department prefect Viang Mekala said on the radio.
"There are about 20 dead and seven seriously wounded, a dozen houses burnt," he added.
President Paul Biya, 90, who has ruled the central African nation for 41 years today, has resisted calls for wider autonomy and responded with a crackdown.
The conflict has claimed more than 6,000 lives and forced more than a million people to flee their homes, according to the International Crisis Group.
"It happened at 4:00 am. Armed young people came and fired on sleeping residents in their houses and set a whole block of houses on fire," a resident told AFP by telephone requesting not to be identified over safety concerns.
"23 people have already been removed from the debris, some of whom are not even recognizable because of the fire," the resident added.
He said there was reason to believe it was connected to the November 6 anniversary of (Paul) Biya’s ascension to the presidency in 1982.
A meeting of the ruling Cameroon People's Democratic Movement (RDPC) was planned in the area, he added.
Both the separatists and government forces have been accused of atrocities in the fighting. Armed groups are regularly accused of abducting, killing or injuring civilians whom they accuse of collaborating with Cameroonian authorities.
Security forces are also often accused by international NGOs and the United Nations of killings and torture against civilians suspected of sympathizing with the rebels.
Last month, rebels "summarily executed" two villagers in public in the northwest region whom they accused of collaborating with the army.
In July, Amnesty International reported that security forces, separatist rebels and ethnic militiamen had committed "atrocities" in the northwest region, including executions, torture and rape.