Two militants were killed in Bandipora district’s Gurez Sector on Tuesday.
Two to three militants were believed to be trapped in the area.
The operation was conducted by the 36 Rashtriya Rifles (RR).
The encounter is still underway.
Meanwhile, the authorities have closed all schools and colleges in south Kashmir’s Anantnag district following the killings of three militants in a shootout with police and army late last night in Anantnag district.
Mobile Internet services were also suspended to prevent the spreading of rumours in the valley.