The attack by ethnic Pokomo farmers on an Orma village, Kipao, came in the early hours of the morning, they say.
Thirteen children and six women were among those killed.
Police say the latest attack was revenge for the killing of more than 100 villagers earlier this year, but some say the raids are political.
Elections are due in March 2013.
Police say that there have been casualties on both sides. Houses were reportedly burnt and villagers cut down with machetes.
Some victims bled to death as they were unable to be treated in time.
“About 150 Pokomo raiders attacked Kipao village, which is inhabited by the Ormas, early on Friday. The Ormas appeared to have been aware and were prepared,” Robert Kitur, Coast Region deputy police chief, told reporters.
He said police were pursuing the raiders, who used firearms, spears, machetes and arrows.
Villagers in the area have fled their homes in fear of revenge attacks, aid workers say.
The Red Cross say they know of at least 30 dead and 30 others seriously wounded, including a one-year-old child. More than 40 houses were set ablaze.
Search teams are said to be combing the area around Kipao, looking for further victims.
Police reinforcements and emergency officials are being flown to the scene, while the wounded are being taken to the port city of Mombasa for treatment.
In August, the two communities clashed after members of the Orma community were accused of grazing their cattle on land that the Pokomo say is theirs.
Settled Pokomo farmers and semi-nomadic Orma pastoralists have clashed intermittently for years over access to grazing, farmland and water in the coastal region.
Police, who have been camping out in the remote region, have been trying to disarm the two groups.
Tensions between the two communities have risen in recent days, they say.
Many suspect a political motive lies behind the attack.
Following the violence in August and September, an MP from the region, Assistant Livestock Minister, Dhadho Godhana, was arrested for inciting violence. He denies the charges.
The UN says the clashes may be related to the redrawing of political boundaries ahead of next year’s general election.
The last election in 2007 was marred by widespread clashes, in which more than 1,300 people were killed.
Four prominent Kenyans have been charged by the International Criminal Court over that violence.
Two of them have formed an alliance to contest the March election – their trial is due to begin a month later in The Hague.
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