Locals have accused the police of executing the seven, whose bodies were said to show signs of torture
The security chief for the state of Rio, Roberto Sa, described the huge public safety operation, which includes an armored vehicle, as being open-ended.
"The entire favela is occupied by police," a resident of the slum told AFP by phone.
Sa told a news conference that seven bodies of young people who disappeared Saturday night were found Sunday in a swampy, hard-to-access area of the slum, known here as a favela.
Locals have accused the police of executing the seven, whose bodies were said to show signs of torture, G1 news reported.
Sa said he had no information on the deaths, while adding, "No police excess will be tolerated, or will be left unpunished."
But he said people were sometimes too quick to accuse police of rights violations before all the facts were in, and noted that 124 police officers have been killed this year in Rio.
At least three people have been arrested in the latest sweep, police said, adding that drugs and weapons had been seized.
The crash took place late Saturday when the police, backed by two helicopters hovering overhead, entered the densely populated area after drug traffickers blocked a road, setting fire to trash and tires, according to police.
Investigators hope to determine if the helicopter was struck by ground fire or suffered a malfunction, but Sa emphasized that the craft was not armored and was mechanically in good condition, G1 reported.
Rio, which is home to 6.5 million people and drastic social inequality, suffers from high levels of crime, made worse by heavily armed gangs of drug traffickers, but also by the presence of paramilitary militias.
The intelligence services have reported a turf fight between the militia of the Gardenia favela and drug traffickers in the City of God, Sa said, adding that "We are investigating this."
Since 2008, the local government has moved to regain control of several favelas that had been in the hands of drug traffickers for 30 years: some 40 specialized Police Pacification Units, or PPUs, were established in 264 favelas, home to more than 1.5 million people, to improve security ahead of the 2014 World Cup of soccer and the 2016 Summer Olympics.
Nearly 10,000 police officers were deployed in these areas. But drug traffickers and militias have been fighting to regain control of certain favelas.
Sa urged Brazilians to take action seeking the toughest possible anti-crime legislation.
For example, one law on the books lets people sentenced to up to 160 years in prison get permission from courts for home leave to celebrate Mother's Day. Often, they do not return to their cells.
A harder line is in order, Sa underscored.