Suspected militants attacked an Assam Rifles vehicle escorting tourists, killing two personnel and injuring several others near the Assam-Arunachal Pradesh border on Sunday.
Militants lobbed several grenades targeting the vehicle at Jagun 12th Mile Barabasti on NH-53 bordering Assam's Tinsukia district in the run up to Republic Day, a defence spokesman said.
The security personnel retaliated and an encounter followed with sporadic firing still continuing.
The Assam Rifles vehicle and three vehicles of tourists returning from the Pangsau festival have been damaged in grenade explosions, the spokesman said.
The entire area has been cordoned off with combing operations stepped up in the area and tourists are stranded along the highway.
The Pangsau Festival is held along the Indo-Myanmar border in the area.