"The militants trapped in a house fired upon the joint team injuring one army man," said the spokesman.
Two to three militants are suspected to be holed up in the house though there is no official confirmation.
Preliminary reports suggest one militant, believed to be associated with Jaish-e-Mohammad (JeM), has been killed in the encounter.
"The body of the militant, along with one AK-47 rifle, has been recovered," a army spokesperson told PTI.
He said a jawan was also injured during the operation.
Sources identified the slain militant as Adil Pathan, a JeM commander, and a resident of Pakistan.
The operation has been extended as security forces suspect that the militants might have breached the cordon and fled into a nearby forest area.
(With PTI inputs)