According to Kurdish forces, jihadists attacked civilians, after which Peshmerga soldiers who responded to the attack were killed in an explosion.
The terrorist movement IS has taken responsibility for the attack through its own channels.
An attack last month, in which five Peshmerga soldiers were killed, prompted Kurdish Prime Minister Masrour Barzani to underline the serious threat that IS still poses in the region.
Barzani is now calling for greater cooperation between Kurdish and Iraqi forces.
IS still has about 10,000 fighters in Iraq and Syria, according to estimates by military forces in the West.