One soldier was killed and three wounded as fighters believed to be from an Islamic State group affiliate looted shops and torched the home of a local chief in the assault Monday, the sources told AFP.
The attack comes days before the end of the Muslim holy month of Ramadan when terrorists who have waged a 10-year insurgency usually ramp up their deadly assaults in the region.
Fighters suspected to be from the Islamic State West Africa Province faction stormed the town, leading to a fight with troops in which sources said the soldier and five jihadists were killed.
Resident Bashir Manzo said the insurgents spent over four hours in town before soldiers backed by a military jet confronted them.
Dapchi was the scene of the abduction of more than 100 schoolgirls by ISWAP in February 2018.
The girls were later released although the only Christian among them is still being held by the group after she reportedly refused to renounce her faith.
The decade-long conflict in the northeast has claimed over 36,000 lives and displaced some two million people.
The terrorists have splintered into factions. In 2016, ISWAP broke from the main Boko Haram group, led by Abubakar Shekau.
In a separate incident on Monday, two female suicide bombers suspected to have been sent by Shekau’s loyalists killed two people in the town of Konduga, security sources and residents said.
The bombers sneaked into the town, 38 kilometres (25 miles) from regional capital Maiduguri and detonated their explosives as a government-backed anti-jihadist militia member was passing on a bicycle.
Jihadists on Monday also stormed Kautikeri and beheaded a local resident and abducted a herder along with 150 of his cattle, a local leader told AFP.