By Agence France-Presse
The fighting broke out after the seven men, who were travelling through the mountainous region by foot, refused to stop for a search, according to the military officer who requested anonymity.
"The seven dead men, who we suspect were from the Wa tribe, were trafficking drugs to nearby Chiang Rai province," he told AFP, adding the shoot-out took place around 1:00 am (1800 GMT Wednesday) close to the border with Myanmar.
The ethnic Wa are mostly based in northwestern Myanmar, where their powerful rebel militia controls a large swathe of territory and is accused of running a narcotics empire.
But some Wa communities have also settled in northern Thailand, which forms part of the notorious Golden Triangle -- a drug-producing zone where the two countries meet Laos.
The Thai rangers seized 554,000 methamphetamine tablets, approximately 30 kilogrammes (66 pounds) of heroine and an AK-47 from the men after the gunfight, according to the officer.
Long a hub for illicit opium trade, the Golden Triangle has more recently become a hotbed of methamphetamine production as demand for the drug soars in Asia.
The latest United Nations Office on Drugs and Crime report said global amphetamine seizures reached a new peak of more than 170 tonnes in 2014, with Southeast Asia, East Asia and North America the three major markets.
Decades of harsh drug laws and an attempted "war" on narcotics has left Thai prisons overflowing with offenders, often caught in possession of small amounts of narcotics.
Senior Thai Junta figures have unexpectedly admitted that the country's tough approach has failed to stem the scourge of drug addiction and have floated decriminalisation of meth as a solution.