"Two bodies have been recovered from the debris of the house where the militants were hiding. One of them has been identified as Muzammil alias Urfi, the self-styled Divisional Commander of Lashkar," a police spokesman said.
Muzammil was one of the militants wanted in connection with the blast inside the High Court in Delhi last year in which 17 people were killed.
He was also involved in a series of attacks on security forces and civilian killings in north Kashmir, the spokesman said.
The other slain militant has been identified as Abdullah Shaheen, a resident of Pakistan, he said.
Three security force personnel -- an Assistant Sub Inspector of Police, an Army jawan and a CRPF jawan -- were injured in the encounter that began in Chanakhan locality of Sopore, 52 kms from here, in Baramulla district yesterday.
Security forces had cordoned off the Chanakhan locality following information about presence of militants in the area.
The house, in which the militants were hiding, was razed to ground this morning.