The brutal killings come as Iraq's political parties negotiate to form a government, nearly a month after a general election.
Security officials have warned that a protracted period of coalition building could give insurgents an opportunity to further destabilise Iraq.
"Men wearing uniforms and driving vehicles similar to those used by the army stormed three houses in the village of Sufia, in the region of Hour Rajab, and killed 25 people, including five women," said the interior ministry official, speaking on condition of anonymity.
A defence ministry official confirmed the details of the attack and the toll.
The interior ministry official said witnesses told security forces the killers entered the village just before midnight on Friday and carried out the murders about two hours later.
They tied up their victims and shot them all either in the head or the chest in a rampage of violence, believed the worst against anti-Qaeda fighters since November 16 when 13 members of a tribe opposed to the jihadists were murdered west of Baghdad.
"Our information is that the killers were from Al-Qaeda," said Baghdad security spokesman Major General Qassim Atta, who put the death toll at 24 -- 19 men and five women -- and added that some were security forces members.
Atta said 17 people were arrested in connection with the killings, and that a security cordon was established around the village.
He added that seven other civilians discovered handcuffed in the village were freed, noting that the group were likely targets as well.
The families were part of the Sahwa (Awakening) movement, known as the "Sons of Iraq" by the US army, which joined American and Iraqi forces in 2006 and 2007 to fight against Al-Qaeda and its supporters, leading to a dramatic fall in violence across the country.
All those killed on Saturday were members of the Jubur tribe, which was among the last supporters of Al-Qaeda to switch its allegiance, eventually only doing so in late 2007.
It is the dominant Sunni Arab tribe in Sufia, part of the Hour Rajab agricultural region on Baghdad's outskirts.
Control of the Sahwa passed to Iraqi authorities in October 2008 and since January 2009, their wages -- said to have been cut from 300 dollars under US leadership to 100 dollars -- have been paid, often late, by the government.
The Sahwa are, however, regular targets of Al-Qaeda, which remains active in the country.
Though the frequency of attacks has dropped significantly across Iraq since its peak in 2006 and 2007, figures released on Thursday showed the number of Iraqis killed in violence last month, 367, was the highest this year.
The death toll for March also represented the fourth consecutive month in which the overall number of people killed was higher than the same month a year previously.
Saturday's violence comes as Iraq's two biggest political blocs -- the Iraqiya list of ex-premier Iyad Allawi and the State of Law Alliance of sitting Prime Minister Nuri al-Maliki -- battle to form coalition governments, more than a week after results from the March 7 poll were released.