Militant Islamist group al-Shabab says it was behind the attack which killed at least six people and wounded one in north-eastern Kenya.
The militants threw a grenade before opening fire in a residential area in Mandera town, police said.
Mandera County governor Ali Roba confirmed the casualties, adding that security guards had saved 27 people.
Al-Shabab is headquartered in Somalia, and has carried out a string of attacks in neighbouring Kenya.
“We have suffered another sad attack,” Mr Roba said in a tweet.
The raid took place in the early hours of Thursday in an area popular with people who came from outside Mandera town, reports the jejeupdates.com’s Ferdinand Omondi from Kenya.
“From the nature and style of the attack, it will obviously be al-Shabab,” Mr Roba told Reuters news agency.
“If not for the quick response by our security forces, we would be talking of many more casualties now.”
Al-Shabab has been at war with Kenya ever since Kenyan forces entered Somalia in October 2011 in an effort to crush the al Qaeda-linked militants.
Kenyan troops are now part of the African Union mission in Somalia fighting the group.