The encounter broke out at Chounigam village, 70 kms from here, when security forces launched a search operation following information about the presence of some militants there, a police spokesman said.
The militants, hiding in a house, opened fire on the search party which retaliated triggering a gunfight, the spokesman said.
He said the gun-battle between the holed up militants and security forces was going on.
There was no immediate report of any casualty on either side, the spokesman said.