According to Jammu and Kashmir police, the gunfighted erupted in the Keshwan area of Kishtwar.
Three-four terrorists are believed to be trapped in the area, the police said.
"Encounter begins at Keshwan Kishtwar between terrorists and Security forces. 3/4 terrorists believed to be trapped. This is same group which killed the 2 innocent villagers," J-K police said.
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More details awaited on the encounter.
This is the third incident of exchange of fire between the forces and terrorists in the last 24 hours.
Security was stepped up in the region after the terrorists killed two village Defence Guards in Kishtwar earlier on Thursday this week.
Earlier in the day, an exchange of fire between the forces and terrorists was reported in Srinagar district.
According to Kashmir police, a joint operation was launched by the police and security forces in the Zabarwan forest area of Srinagar on Sunday morning.
"A joint Police and security forces operation was launched in Zabarwan forest area of #Srinagar based on specific intelligence about the presence of #terrorists. An exchange of fire ensued during the operation," Kashmir police said in a post on X.
On Saturday evening, one terrorist was neutralised during a joint anti-terror operation by police and forces in the Sopore area of Baramulla. A search operation in this regard is still underway in the district, the police said. (ANI)