They described a horrific scene at the end of the two day stand-off at Moulvibazar near Sylhet.
Police told local media the militants detonated a grenade after failing to escape and to avoid being captured.
The dead are believed to include members of a local jihadist group.
On Saturday six people - two police officers and four civilians - were killed in twin bombings in Sylhet when commandos flushed out another group of suspected Islamist militants.
So-called Islamic State (IS) claimed on messaging app Telegram that it was behind one of the blasts.
In the latest incident on Thursday, police told The Daily Star that the bodies were discovered when a bomb disposal team entered the militants' den after "disposing of grenades and bombs [which were] lying scattered on the floor" of the building.
The paper says that the sound of gunfire and explosions could be constantly heard right up until the time the security forces entered the premises.
It is unclear how a child was apparently caught up in the violence.
The BBC's Waliur Rahman in Dhaka says that another suspected hideout in the same north-eastern area has also been surrounded by police since Wednesday.
Meanwhile, law enforcers are also keeping a close watch on a building in the eastern town of Comilla, where a similar raid to flush out militants is imminently expected.
The escalation in violence comes at a time when many in Bangladesh thought security forces had managed to curb Islamist militancy, following the deadly siege on a cafe in Dhaka last year.
Recent suicide attacks on security camps and checkpoints have surprised many.
IS has claimed to be behind at least two other incidents this month, including one at a checkpoint near Bangladesh's international airport and one involving a man who tried to cross a checkpoint run by an elite police unit.
However, Bangladeshi police maintain that an offshoot of the banned Islamist outfit Jamiatul Mujahideen Bangladesh (JMB) is responsible for many of these attacks, despite claims to the contrary by IS and al-Qaeda.

Firefighters were called to the property in Ynysfach just before 04:00 GMT.
The blaze had started in rubbish outside the house and spread to the kitchen
The Welsh Ambulance Service said two male casualties were taken to Prince Charles Hospital.

The 26-year-old, who was with juniors Kelty Hearts, has signed for Edinburgh City in League Two.
Thomson pleaded guilty in June 2011 to inappropriate conduct towards two underage girls over the internet.
City noted his court conviction but said on Twitter they believed he deserved a second chance.
"The club acknowledges Craig's previous conviction in 2011 for offences he committed in 2010 and does not condone his behaviour in any way," they said in a statement.
"However, the club's board, management, playing staff and main sponsor collectively believe that Craig has completed his rehabilitation and we look forward to giving him the opportunity to return to playing in the SPFL."
Thomson was loaned to Lithuanian clubs Kaunas and Suduva after being fined and placed on the sex offenders' register for five years but never played for Hearts again.
After leaving Tynecastle officially in 2013, the former Scotland Under-21's potential move to Cyprus was swiftly cut short when prospective club Paphos discovered his conviction.
But he has since played for East of Scotland junior sides Arniston Rangers, Newtongrange Star and Kelty, who won the Super League last season.
Former Hearts manager Jim Jefferies, who is sporting director with Edinburgh City, stated the club would be making no further comment.
Up to eight people including a child were killed when suspected Islamist militants blew themselves up after being surrounded in a hideout in north-eastern Bangladesh, police say.
[NEXT_CONCEPT]
Two people have been taken to hospital suffering from the effects of smoke inhalation after a house fire in Merthyr Tydfil.
[NEXT_CONCEPT]
Former Hearts full-back Craig Thomson has returned to Scottish senior football for the first time since he was convicted of a sex offence.