The convoy was returning to barracks at Bordj Bou Arreridj, southeast of Algiers, after escorting Chinese construction workers to a motorway project, when it came under attack on Wednesday evening, the sources said.
At least 24 Algerian paramilitary police have been killed in an ambush on their convoy, local sources said.
One newspaper, Echourouk, reported that the anti-government fighters set off two roadside bombs and then opened fire on the police, killing them and then stealing their weapons and uniforms.
The attackers fled the scene with arms, weapons and six off-road police vehicles, according to the newspaper.
The ambush was not immediately confirmed by the Algerian authorities but a vast security operation has been launched in the region.
Rise in violence
The government of Algeria, a major oil and gas producer, has struggled for nearly two decades to combat fighters who now operate under al-Qaeda's banner.
In recent weeks there has been a rise in violence across the country.
In late May fighters killed five paramilitary gendarmes and a week later shot dead nine soldiers.
In early June, Edwin Dyer, a British man, was killed by suspected al-Qaeda fighters who had been holding him hostage in neighbouring Mali.
Violence began in Algeria in 1992 when a military-backed government scrapped elections that a radical Islamic party was poised to win.
About 150,000 people have died in the ensuing violence.
Local media stated on Thursday that at least 21 Algerian paramilitary police had been killed after an ambush on their convoy.

The convoy was en route to their barracks at Bordj Bou Arreridj, following an escort of Chinese construction workers to a nearby worksite, located southeast of Algeria's capital of , when it was attacked late Wednesday.

Militants detonated no less than two roadside bombs to block the convoy, consisting of six vehicles. They then opened fire on the police before stealing their uniforms, weapons, and vehicles. The militants, as part of Al-Qaeda's network, are referred to as al-Qaida in the Islamic Maghreb, (AQIM).

Newspaper reports indicated that 21 people had died, while a local official said 23 were killed and a further five had been hospitalized.

A large security operation has started in the area; however, the attack was not immediately confirmed by Algerian authorities.

The militants have been left over from a civil war begun in 1992 between the government and radical Islamists that has killed between 150,000 and 200,000 people. Violence has since diminished, but attacks on government forces still occur.