Two people were shot and killed by gunmen believed to be Al Shabaab militants in Pandaguo area, Lamu County.
Police who responded to the Christmas Day incident said several houses in the area were also torched by the attackers.
The area is near the Kenya-Somalia border which has been under attack by terrorists in the past.
It is also near Boni Forest which is an operation zone as the national government has since 2015 conducted a multi-agency security exercise dubbed Linda Boni, which is aimed at flushing out al-Shabaab militants believed to be hiding there.
Police said the attackers invaded Taa village and targeted homes in a coordinated manner.
Many villagers ran and hid in bushes as the gang descended on their homes, survivors said.
Coast regional commissioner John Elungata said assailants attacked the village at around 8pm but were repulsed by Kenya Police Reservists after a heavy gunfight.
“They escaped into the Boni forest and a multi agency security team has been deployed in the area,” he said.
Elungata urged locals to cooperate with security officers on the ground.
“The situation is calm, we have officers patrolling the area and we would like to ask members of the public to tell us what they know to help us in our investigations as we continue hunting them” said Elungata.
The attack comes barely a week after the suspected al-shabaab militants attacked a police vehicle between Hayley Lapsset camp and Garissa.
The police vehicle was heading to Garissa when it stepped on an improvised explosive device.
They then attacked again using a rocket-propelled grenade followed by heavy gunfire that led to the death of one civilian and two police officers.
The vehicle attached to Galmagalla Police Station, Bura East operating along the LAPSSET corridor was also set ablaze by the assailants.