The man is identified as Dere Suwe. Madang Police said the killing occurred as a result of a fight between a group of men from Enga and Hela provinces who reside at Ramu also.
Police said the party from Hela were chased by the Engans when one of them decided to get into a parked vehicle that was filled with people from the Rai Coast.
Madang Provincial Police Commander Acting Superintendent Mazuc Rubiang said an Engan man, without identifying his enemy, swung his knife at passengers in the vehicle and cut off the hand of a man from Rai Coast.
PPC Rubiang said passengers in the vehicle retaliated and in the process late Suwe was beheaded. PPC Rubiang said Ramu police responded and prevented any more attacks at the settlement.
He said arrests will be made on those involved.
The PPC said Ramu police could have acted sooner when the fight started, but could not due to logistics issues. He urged provincial leaders to increase their efforts in assisting the police in the province. He added that areas where communities work together with police, face less law and order issues.