"Two terrorists were killed in the encounter in Arampora area. Their bodies are being recovered and a search operation is on," the sources said.

According to the police, the security forces including personnel from Rashtriya Rifles (RR), the state police's Special Operations Group (SOG) and the Central Reserve Police Force (CRPF), cordoned off the area earlier in the morning upon receiving a tip-off about the presence of militants.

"As the cordon was tightened, the militants fired at the security forces triggering the gunfight," the police said.

As a precautionary measure, authorities have suspended mobile Internet services in Sopore.

Educational institutions have also been closed for the day in Sopore.