The gunfight erupted in Dodhipora village, some 75-km from here, when a joint team of police and Rashtriya Rifles launched a search operation to flush out hiding militants.
Security forces confronted the ultras and in the ensuing gunbattle, two LeT ultras and a cop were killed, a police spokesman said.
The search operation was still on, he said adding this was the second major encounter between militants and security forces in the Valley in the past one week.
On December 19, six hardcore LeT militants were killed in Sopore town in north Kashmir's Baramulla district.