Police had yet to identify the victims, the Financial Times reported.
The grisly discovery was made days before President Enrique Pena Nieto was to visit Michoacan state, the newspaper said.
Officials blamed the murders on the Knights Templar drug cartel. A local group that monitors crime in the area said the victims were found with a sign reading "for all those who switched sides." An unidentified official said it was a warning of what could happen to others.