Security forces on Sunday evening surrounded a residential area in south Kashmir's Kulgam district where suspected militants are holed up.
Preliminary reports suggest that the security forces exchanged fire with hiding militants.
The gunbattle was reported in Redwani area of south Kashmir's Kulgam district, more than 60 km away from Srinagar.
The operation was hampered when local protesters marched towards the encounter site and hurled stones.
The police have not furnished any details of the encounter or confirmed number of militants holed up in the area.
The operation was on when this report was being filed.