Arriving in 10 trucks, Boko Haram militants stormed the village of Gasarwa near the garrison town of Monguno late Friday, setting homes on fire.
"Five people were killed in the arson, they included two elderly men and three children," Babakura Kolo, a militia leader in the Borno state capital Maiduguri said, Presstv reported.
Militia defending the village said they were outnumbered and outgunned.
Militia member Ibrahim Liman said the attackers watched food supplies and livestock burn in the fire but made no attempt to loot.
Boko Haram has intensified its militancy in recent weeks, especially against military targets in which dozens of troops were believed to have been killed or gone missing.
At the end of July, a group of extremists in five trucks sacked a military post in nearby Bunari village, with a military source claiming 11 troops were killed.
The attacks appear to undermine repeated claims by the military that Boko Haram had been defeated.