Security forces cordoned off village Kangan in Pulwama, 35 km from here, following information about presence of militants there, the police said.
As security forces surrounded the house where they were hold up, the militants opened fire, which was retaliated, they said.
The exchange of fire, which continued for nearly one hour, police said, adding a militant was injured in the operation.
Security forces maintained a tight cordon around the area to prevent militants from escaping under the cover of darkness, they added.