The militant identified as Kasim Khan alias Usman was overpowered by those whom he took hostage at a school here.
"The militant has been arrested from a school building during the operation and hostages have been freed," Deputy Commissioner (DC) Udhampur, Shahid Iqbal Choudhary told PTI.
A top police officer said that preliminary questioning has revealed that Usman, aged 16-18 years, is from Faislabad in Pakistan and he told police that he had recently infiltrated from across the border to carry out terror attacks here.
Two BSF soldiers were killed and 11 personnel injured in the attack on a BSF convoy on Jammu-Srinagar national highway in Udhampur.
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Another terrorist involved in the strike was shot dead in retaliatory fire.
Usman, after the attack in Nassu-Samroli area, escaped and took five people hostage in a school building in a nearby hamlet.
"As I came out of my house after hearing gun shot, this militant came and asked me to come with him. He had already taken three-four people along," Rakesh Kumar, a youth who was taken hostage said.