Though it was not immediately known if there was any casualty, sources said that some army men suffered burn injuries.
The attack began at around 0400 hours and the number of militants was believed to be three.
Immediately after the militants entered the camp, explosions and exchange of heavy fire were heard from inside, official sources said.
Initially, the attack was understood to be at the Brigade Headquarters but sources in the Army said it was at the rear formation of a battalion that was deployed at the Line of Control (LoC).
Helicopters were pressed into service to deploy Special Forces of the Army and to evacuate the injured.
Union Home Minister Rajnath Singh postponed his forthcoming visit to the United States and Russia following the terrorist attack.
The encounter is underway between the unknown number of terrorists and the Armed Forces in the area, in which reportedly six soldiers have been injured out of which three have been airlifted to the nearest hospital.
Meanwhile, Para Commando troops have been airdropped into the conflict zone to fortify the response by the defence.
Intense firing and explosions were heard in the area and the encounter site is nearly 90 kilometres north of Srinagar.