The raid was an attempt to arrest the suspected leader of a drug gang controlling the area, however he reportedly managed to escape.
Police also arrested seven suspects and confiscated two machine guns, a hand grenade and three fake police uniforms as well as cocaine, sources told Reuters.
Television footage showed bodies strewn on the streets of the Coreia and Vila Alianca slums after the shooting.
Violent city
There were also reports on Thursday that police killed an alleged car thief and three suspected drug dealers in two separate shootouts in the poor Rio suburb of Nova Iguacu, AP said.
Rio de Janeiro is one of the world's most violent cities, with frequent clashes between police and drug gangs that left 1,330 suspects dead last year, police say.
The killings came less than a month after Luiz Inacio Lula da Silva, the Brazilian president, visited the city's slums to launch a new infrastructure project.
He also warned police to treat the local residents with respect.