At least six people were killed and several others injured when terrorists wearing the Indian Army uniform hijacked a car, drove to Punjab's Gurdaspur district, sprayed bullets on a bus and then stormed a police station.
Three home guard personnel who were inside the police station were among those feared killed . Other victims were civilians, including a person inside an adjoining hospital.
Special forces of the army and NSG as well as police commandos took up position around the Dinanagar police station. They were standing by as the Punjab Police carried out their operation.
Monday's attack began at 5.30am at Dinanagar town in Punjab's frontier district of Gurdaspur, close to the India-Pakistan border and near the border with Jammu and Kashmir state.
A gun battle raged between the terrorists, holed up inside the Dinanagar police station, and security forces, including soldiers. Continuous sound of firing and grenades could be heard even hours after the first shots were fired by the militants.
The police station, adjoining government hospital, residential quarters inside the police station and nearby private houses were quickly cordoned off by security forces.
The town is about 15 km from the India-Pakistan border and 25 km from the border of Jammu and Kashmir state. It is about 235 km from Chandigarh.
In a related development, five live bombs were found on the Amritsar-Pathankot railway track.
The bombs were found by passersby on a bridge near Parmanand railway station on the Amritsar-Pathankot railway section, who informed security forces. Trains on the route were stopped immediately.
The siege focused on an abandoned building where the attackers holed up. It dragged on because security forces had wanted to capture at least one of the militants alive, a senior government source said.
Police killed three unidentified attackers who had pulled up at the police complex in a stolen white car.