A group of militants, including a Lashkar-e-Toiba (LeT) commander, is believed to be trapped in a house as gunbattle starts in north Kashmir's Sopore area, 55 km away from Srinagar.
Preliminary reports suggest that the security forces cordon of the Krankshevan locality in the town around 5pm.
The search party came under fire from militants apparently hiding in a house.
Being a congested locality, the security forces warned people on mosques' address system against venturing into the cordoned area.
Sources said the militants in a bid to escape launched a major offensive around 8pm. It was repulsed by the security forces.
The security agencies suspect presence of more than two militants.
The fresh gunbattle comes just three days after three local militants were killed in an encounter in south Kashmir.
Sources said Sopore area has witnessed movement of fresh batch of LeT militants of late.