The incident took place after the rebels opened fire on a police and SOG team when it was carrying out a combing operation in the forest area late last night, said Inspector General of Police (Northern Range), Susanta Ku Nath.
An SOG jawan received bullet injury during the exchange of fire, he said.
The injured personnel was taken to the district headquarter hospital at Balangir and airlifted to a facility in Visakhapatnam for better treatment today, the IGP said.
Balangir Superintendent of Police, K Siva Subramani, said around 20 Naxalites were believed to be present in the area when the police had launched the operation.
In the aftermath of the encounter, a massive combing operation has been launched to track the ultras, the IGP said.