Islamic State claimed responsibility for the deadly attack in a statement posted on an affiliated Telegram account.
The attack took place in the Makhmour region, a hotbed for Islamic State activity that sees regular attacks against Kurdish forces, Iraqi forces and often civilians.
Makhmour is a mountainous area about 70 km (45 miles) southeast of Mosul and 60 km (40 miles) southwest of the Kurdish capital of Erbil.
Kurdistan's Prime Minister Masrour Barzani called for greater security cooperation between Iraqi Kurdish and Iraqi security forces to stop Islamic State's insurgent activities.
Iraqi officials and analysts have long blamed a lack of coordination along a stretch of territory claimed by both Baghdad and Erbil for Islamic State's continued ability to wage deadly attacks.
Islamic State controlled roughly a third of Iraq between 2014 and 2017, including the remote Makhmour region but also major cities including Mosul.
A loose coalition of US-led forces, Iraqi and Kurdish troops and Iran-backed Shi'ite militias defeated the Sunni Muslim extremist group in 2017, but its members still roam areas of northern Iraq and northeastern Syria.
Western military officials say at least 10,000 Islamic State fighters remain in Iraq and Syria.
A statement from the Kurdistan region's armed forces, the peshmerga, said Islamic State militants attacked the village in the early hours of Friday killing three residents.
It said peshmerga forces intervened, resulting in clashes that killed at least seven of their soldiers.
Kurdish security and hospital officials said the final death toll was at least 10 peshmerga soldiers and three villagers.