"The encounter has ended and boys did a good job by preventing the militants from striking anywhere," Director General of Jammu and Kashmir Police K Rajendra told PTI here.
"In all, we have lost three Army personnel and five civilians. All the four militants have been killed," he said, after the end of the encounter this morning which lasted over 24 hours following the fidayeen attack.
The operation to neutralise the militants began yesterday morning and went on throughout the day but was suspended during the night.
An Army official said that security forces, who had launched a cordon and search operation at the site of encounter in Arnia this morning to retrieve bodies of the civilians, came under fire from a militant holed up in a bunker triggering fresh exchanges in which he was killed.
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A fierce gunbattle then ensued and the terrorists who were in combat fatigues later entered two abandoned bunkers and remained holed up before three of them were neutralised.
Security officials suspected that the militants wanted to carry out a sensational strike in the winter capital of Jammu and Kashmir to coincide with the visit of Prime Minister Narendra Modi, who held a poll rally in Udhampur today. The venue of the rally was about 100 km from Arnia.
The five civilians who died also included two people who had tried to flee from the car, in which they were travelling, when it got caught in the cross-fire between militants and security personnel.