Suspected Boko Haram Islamist militants roared into a northeastern Nigerian village on motorcycles, opened fire on a market and set shops and homes ablaze, killing at least 37 people, according to a military official.

Residents said the death toll could be even higher, with villagers still missing and feared dead after fighters chased them into the bush.

The attack took place on Sunday afternoon in Yobe, one of three states at the frontline of an insurgency that has lasted 15 years. Thousands of Nigerians have been killed and more than 2 million displaced.

Yobe police spokesperson Dungus Abdulkarim said the attack in Yobe's Mafa village was apparent retaliation for the killing of two suspected Boko Haram fighters by local vigilantes.

After shooting at the market and torching buildings, the militants chased other residents into the bush and shot them, Abdulkarim added.

"The terrorists killed many people, but we are yet to ascertain the actual number of casualties," Abdulkarim said.

A military official who accompanied the army's commanding officer for Yobe to Mafa on Monday evening said the route to the village had been rigged with explosives, which troops managed to defuse.

"We recovered 37 corpses and brought them to Babangida General Hospital," said the official, who declined to be identified because he is not authorised to speak to the media.

Modu Mohammed, a resident, said several more residents were missing and estimated the death toll at over 100. He said some corpses were still in the bush.