Security forces launched an anti-militancy operation in Tarzoo area of Sopore town on Sunday evening following information about presence of militants there, the police said.
The security forces cordoned the Krankshevan locality in the town around 5pm on Sunday. The search party came under fire from militants apparently hiding in a house.
Being a congested locality, the security forces warned people on mosque address system against venturing into the cordoned area.
Sources said the militants, in a bid to escape, launched a major offensive around 8pm on Sunday. It was repulsed by the security forces.
The security agencies suspect a presence of more than two militants.
The fresh gunfight comes three days after three local militants were killed in an encounter in south Kashmir.
Accordig to sources, Sopore area has witnessed a fresh movement LET militants of late.