The deceased has been identified as Abid (27) of Yamunanagar and his injured accomplice is Ashraf (28), also of Yamunanagar, Kurukshetra Superintendent of Police (SP) Simardeep Singh said.
Police received information about cow smuggling taking place in the early hours. A police party reached Anaj Mandi and tried to stop the smugglers, who opened fire on them, he alleged.
The policemen retaliated in which Abid died while Ashraf was injured, he said.
In the firing by smugglers, a police vehicle was badly damaged, he said. However, no policeman was injured in the encounter.
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Police has confiscated the vehicle used by the smugglers, he said. Singh said that the cattle smugglers were using the vehicle for smuggling cows.
Sources said that three other smugglers managed to escape under the cover of darkness.
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Singh said two cows and as many bulls were found in the rear of the vehicle. One country-made revolver, four live cartridges and a mobile phone were recovered from near the body of the deceased.
He said the Deputy Commissioner has asked the Thanesar Sub-Divisional Magistrate to conduct an inquiry into the encounter.
This might be the first case under the newly-enacted Gauvansh Sanrakshan and Gausamvardhan Act, the SP said.
In a related incident, a mini-truck carrying 14 animals mostly cows and bulls, overturned near Umri village, eight kms from here, when members of Gau Rakshak Sewa Dal and a police team chased the vehicle.
An investigation into the case is on, he said.