"From all indications, the terrorists aimed at causing havoc at the Internally Displaced Persons (IDPs) camp located at Dikwa," army spokesman Colonel Sani Usman said in a statement Thursday.
He said security forces "decisively dealt with the terrorists", killing 26 of the extremist fighters and seizing weapons and ammunition.
One soldier and a local vigilante assisting the military in the fight against Boko Haram were killed, he said.
Usman said three soldiers and four IDPs were injured in the encounter, adding that anti-aircraft guns, assault rifles and explosives were among the weaponry recovered.
"The casualties have since been evacuated while the troops have been pursuing those terrorists that escaped with gunshot wounds," he said, AFP reported.
Boko Haram, which has increasingly used suicide and bomb attacks as the military pushes them out of territories it once controlled, has previously hit Dikwa, some 90 kilometers (50 miles) from Maiduguri, the birthplace of the sect.
On Feb. 9, two female suicide bombers attacked the IDP camp in Dikwa, killing at least 58 people.
Boko Haram, which is allied to the Daesh (ISIL) terrorist group in Syria and Iraq, wants to create a hardline state in northeast Nigeria.
At least 17,000 people have been killed since 2009 and 2.6 million forced from their homes in violence that has increasingly hit Nigeria and its neighbors Cameroon, Chad and Niger.