The encounter, which took place at Hollam village under Khonsa circle lasted for nearly an hour, Tirap SP Vikramjit Singh told PTI.
"On specific information about the presence of the militants in the village, a team of Assam Rifles cordoned the area. Seeing the security personnel, the militants resorted to firing which forced the security personnel to retaliate," the SP said.
The slain militants were identified as self-styled sergeant major of the outfit Wang Shung Mi and Corporal Sumong Tikhil and hail from Nagaland.
A massive manhunt was launched in the area immediately in search of other probable militants.
Meanwhile, strong reaction evoked at Khonsa, the district headquarters over the death of the two civilians.
Public and students' unions resorted to road blockade demanding immediate arrest of the persons involved.