"The encounter at Ahmadnagar locality of Buchpora ended with the killing of both the militants holed up in a residential house," a police officer said.
He said charred bodies of both the militants were recovered along with two AK rifles and some ammunition from the house which had caught fire.
The officer said the slain ultras were believed to be members of LeT and efforts were on to establish their identity.
A policeman was injured in the initial gunbattle but the operation to neutralise the militants was suspended to ensure safety of civilians, including a couple in whose house the militants had taken shelter, the officer said.
After night-long lull, the encounter resumed this morning after the ultras let go the house owner Abdul Majid Rangrez and his wife trapped with them, he said.
The officer said the holed up militants refused to surrender and continued intermittent firing on the security forces during which another policeman was injured today.