In a statement on Wednesday night the military admitted to the murders of 10 Rohingya in the coastal village of Inn Din, about 50 kilometres north of the state capital Sittwe, but described the victims as "terrorists" who were supposedly among a group of 200 people who had attacked security forces using sticks and swords.

"This grisly admission is a sharp departure from the army's policy denial of any wrongdoing," said James Gomez, Amnesty International's regional director for south-east Asia and the Pacific.

"However it is only the tip of the iceberg and warrants serious independent investigation into what other atrocities were committed amid the ethnic cleansing campaign that has forced out more than 655,000 Rohingya Muslims from Rakhine state since August," he said.

Gomez said it was "appalling that soldiers attempted to justify extrajudicial executions by saying they [soldiers] were needed as reinforcements elsewhere and did not know what to do with the men."

"Such behaviour shows a contempt for human life which is simply beyond comprehension," he said.

The statement posted on the Facebook page of military commander-in-chief Min Aung Hlaing said an internal investigation had found the 10 men had been thrown alive into a mass grave and stabbed by Buddhist villagers angry they had lost relatives in attacks by Muslim insurgents.

Soldiers then shot them dead, the statement said.

"Action will be taken against the villagers...and the security force members who violated the rules of engagement according to the law," it said.

The statement said the captives should have been handed over to police in line with procedures amid on-going attacks.

"It was found that there were no conditions to transfer the 10 Bengali terrorists to the police station and so it was decided to kill them," it said.

The United Nations has described atrocities committed by the military in Rakhine as textbook ethnic cleansing and "very likely" crimes against humanity.

More than 655,000 Rohingya have fled Rakhine since August in the largest movement of a civilian population in Asia in decades, creating a humanitarian emergency in squalid refugee camps in Bangladesh.

The aid group Doctors Without Borders estimates as many as 13,000 Rohingya have been slaughtered, including thousands of children, amid mass rapes and burnings.

Until now the military and government led by Nobel laureate Aung San Suu Kyi has staunchly rebutted overwhelming and extensively documented evidence of atrocities by the UN, independent researchers and media outlets, including Fairfax Media.

An internal military investigation had cleared soldiers of any wrongdoing.

Meanwhile, the United Nations Children's Fund (UNICEF) has painted a gruesome picture of conditions in Rohingya camps inside Rakhine, saying 4800 children suffering from acute malnutrition before the violence erupted in August are no longer receiving life-saving treatment because treatment centres run by non-government-organisations have been looted, destroyed or staff cannot access them.

UNICEF spokeswoman Marixie Mercado, who is among the few outsiders to reach remote camps by boat, said international agencies still did not know the extent of the suffering among 200,000 Rohingya living in Rakhine under severe restrictions because of bans on outsiders travelling there.

Mercado said the first thing you notice when you reach the camps is the stomach-turning stench.

"Parts of the camps are literally cesspools. Shelters teeter on stilts above garbage and the excrement," Mercado said, adding that in one camp four children aged three to 10 died in the first 18 days of December.

Mercado said it was extremely difficult for Rohingya to leave the camps for medical treatment. She said there was a "deep level" of fear between Rohingya and Rakhine Buddhists.

Rohingya parents were refusing vaccinations because Buddhist security officers accompany those offering to provide them.

In the Maungdow township, where widespread atrocities have been documented, she said few people came out to the streets and large areas have been razed by bulldozers.

Only about 60,000 people remain in the town where 440,000 were living before August, she said.