Parliamentary Affairs Minister Abdul Rehman Veeri informed the Jammu and Kashmir Assembly that Subedar Madanlal Chowdhary and Subedar Mohammed Ashraf Mir were killed in the attack by a group of militants.
The Army, however, maintained that only one JCO was killed.
Briefing media persons at the main entrance of the camp, Jammu-based Army PRO Lt Col Devender Anand said, "In the early hours today after a brief exchange of fire with sentry on the periphery, some terrorists entered the family accommodation complex.
He said in the operation to evacuate families, one JCO was killed while six persons, including women and children, suffered injuries.
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"Due to the presence of women and children in the housing colony, the operations is being progressed cautiously to minimise the casualties," he said.
The Major has been airlifted to an Udhampur hospital where his condition was stated to be critical, Army officials said.
Army helicopters and drones have been pressed into service to ascertain the exact location of the terrorists, officials said.
A final assault against the holed-up terrorists would be launched once the rescue operation is over, officials said.
Contingents of para-military CRPF and police personnel have been posted outside the boundary wall and were keeping curious onlookers at bay to avoid civilian casualties. Generators and searchlights were brought to the camp, apparently for a night assault.
Inspector General of Police (Jammu) S D Singh Jamwal told reporters here that "around 4:55 am suspicious movement was noticed by the sentry and his bunker was fired upon. The fire was retaliated. The number of militants is not known. They have been cornered in one of the family quarters."
Soon after the attack, reinforcements of the Army's special forces and special operations group (SOG) rushed to the spot and cordoned off the area amid a fierce gunfight, security official said.
A high alert has been sounded in Jammu and security beefed up in and around the city.
Intelligence inputs had warned of an attack on an Army or security establishment by Jaish-e-Mohammed in view of the death anniversary of Afzal Guru who was hanged on February 9, 2013.
Those injured included an Army officer, Havaldar Abdul Hamid, Lance Naik Bahadur Singh and the daughter of slain Subedar Chowdhary, the minister earlier told the House which witnessed protests by BJP members who raised anti-Pakistan slogans.