"The toll in several air strikes on the town of Salma in Jabal Akrad rose to at least 20 people," Observatory director Rami Abdel Rahman told AFP.
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Abdel Rahman said 10 of those killed were believed to be civilians, although many of the bodies were so badly damaged that it was not immediately possible to identify them.
At least six of those killed were Syrian rebel fighters, while four were foreign volunteers, he added.
"The number of deaths is expected to rise because of the number of wounded and those in serious condition among them," he said.
Latakia is a predominantly Sunni village and the attack is part of government forces attempt to retake territory in the western heartland of President Bashar Assad's Alawite sect.
The rebel capture last week of 11 villages in the regime stronghold of Latakia province was a symbolic blow to Assad, whose troops have otherwise been making gains in central Syria and around the capital Damascus.
Assad's forces are now trying to retake those villages, predominantly populated by Alawites, an offshoot sect of Shiite Islam.
The mountainous region near the Mediterranean Sea is also home to villages populated by Sunni Muslims, who dominate the rebel ranks.
The Observatory also reported heavy clashes between troops and rebels in the surrounding Jabal al-Akrad mountains on Saturday. It had no reports of casualties in the fighting.
Amateur video footage posted on the Internet showed a large apartment block with all its outside walls blown out. Men, some in military fatigues, were seen loading bodies onto a pickup truck.
The state media said Saturday that government troops recaptured three of the 11 villages. Activists confirmed the fall of one village but said fighting was continuing in the other two.
Most of Latakia province has been tight government control and comparatively peaceful during the conflict, now in its third year. But earlier this week rebels including foreign fighters swept through a string of villages, sending civilians fleeing their homes. At least 60 civilians, mostly women and children, were killed in the rebel offensive, activists said. They say another 400 civilians, mostly Alawites, are missing and are presumed to be in rebel custody in the area.
The activists spoke on condition of anonymity for fear of reprisals.
Salma is a Sunni village in the Jabal Akrad mountain range which overlooks the Mediterranean, on which the port city of Latikia sits. Rebel forces comprised of mainly Islamist brigades, including two al-Qaeda-linked groups and based in Salma, have killed hundreds in offensives this month and have seized several Alawite settlements.
Assad's troops have recently advanced near the border with Lebanon and in the city of Homs, an opposition stronghold. They have also fought pockets of resistance around the capital, where they ambushed a large group of rebels on Wednesday, killing more than 60 fighters.
Rebels, however, have made advances in the past week in the north, where they succeeded in taking over an air base after months of fighting.
Syrian's conflict started in March 2011 as a largely peaceful uprising against Assad's authoritarian rule. It has taken on an increasingly sectarian tone in the last year. More than 100,000 people have been killed in the conflict.
The Associated Press and AFP contributed to this report
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