The killings, which took place Tuesday in the eastern Deir el-Zour province, highlight the sectarian nature of Syria's conflict that has killed more than 80,000 people, according to the U.N.
The Britain-based Syrian Observatory for Human Rights said at least 60 people were killed in the village of Hatla in the oil-rich province that borders Iraq.
Thousands of rebels took part in the attack and at least 10 of them were killed in the fighting, said the Observatory.
In Damascus, a government official said the rebels "carried out a massacre against villagers in which older people and children were killed." The official spoke on condition of anonymity because he was not authorized to speak to the media.
The fighting in Deir el-Zour came a week after Syrian troops, backed by Lebanon's militant Shiite Hezbollah group, captured the strategic town of Qusair near the Lebanese border after nearly three weeks of fierce battles that killed dozens of troops, rebels and Hezbollah members.
Hezbollah's involvement in the Qusair battle underlined the group's commitment in support of President Bashar Assad's regime and edged the civil war in Syria closer to a regional sectarian conflict pitting the Middle East's Iranian-backed Shiite axis against Sunnis.
Most of the armed rebels in Syria are from the country's Sunni majority, while Assad has retained core support among the minorities, including his own Alawite sect, an offshoot of Shiite Islam, along with Christians and Shiites.
An activist based in Deir el-Zour said the rebel attack was in retaliation for an attack Monday by Shiites from Hatla that killed four rebels. Thaer al-Deiry, who identified himself only by his nickname for fear of government retaliation, said via Skype that rebels gathered and launched a counter attack Tuesday.
He said some 150 Shiites from the village fled across the Euphrates River to the government-held village of Jafra.
"The situation in the village is quiet and the Free Syrian Army is in full control," al-Deiry said, referring to the rebels. He added that the village has been under opposition control for more than a year but some of its Shiite residents recently started collecting arms apparently to fight along government troops.
Also Wednesday, the Observatory reported heavy clashes in the central city of Homs, mostly in the neighbourhood of Wadi Sayeh. The fighting appeared to be an attempt by government forces to separate two main rebel-held areas in the city, Khaldiyeh and the centre of Homs.
Building on its victory in Qusair, the Syrian military has shifted its attention to try to clear rebel-held areas in Homs, a linchpin area linking Damascus with regime strongholds on the Mediterranean coast, and the northern city of Aleppo.
Associated Press writer Albert Aji contributed to this report from Damascus, Syria.