One jawan was also injured in the firing.
A senior Chhattisgarh police officer said the injured trooper, who had bullet injuries on his chest, has been flown to capital Raipur for medical treatment.
The incident took place in Basguda camp of the Central Reserve Police Force, or CRPF, in Bijapur district of south Chhattisgarh, part of the heavily-forested Bastar region of the state that has been the epicenter of Maoist violence. The fratricide was reported around 5 p.m. at the CRPF's intelligence wing's camp.
The CRPF jawan who is accused of firing at his colleagues had been identified as Sanath Kumar, 35, of Firozabad in Uttar Pradesh.
The four soldiers who died have been identified sub-inspectors VK Sharma, 34, from Jammu and Kashmir's Samba district, and Megh Singh, 52, from Ahmedabad in Gujarat, assistant sub-inspector Rajbir, 48, from Jhunjhunu in Rajasthan and constable GS Rao, 37, from Vijaynagram in Andhra Pradesh.
Chhattisgarh Chief Minister Raman Singh has conveyed his condolences to the force for the loss of four lives in the tragedy.
Bastar top police officer Sundar Raj P did not comment on reports that the jawan was angry about not being allowed to go on leave.
"Investigations are at a very early stage... If he had any grievances, the nature of the grievance is something that will be known after we speak with others in the CRPF camp," he said.
The CRPF, the country's lead anti-insurgency force, would also conduct a court of inquiry into the incident. "This would help us understand better what happened and avoid similar incidents in the future," Sundar Raj P said.
From 2014, 25 incidents of fratricide have been reported by the central armed forces.
According to the Union Home Ministry, most cases of suicides and fratricides in the central forces have been linked to generally personal and domestic problems like marital discord, personal enmity, mental illness and depression.