The house, in which the militants were hiding, has been razed to ground and a search is on to locate the bodies of the two militants after the encounter ended this morning, police said on Sunday.
They said two security force personnel - an Assistant Sub-Inspector of Police and a CRPF jawan - were injured in the operation that was launched on Saturday.
Security forces had cordoned off the Chanakhan locality in Sopore, 52 kms from state capital Srinagar, last evening following information about presence of militants in the area.
The militants opened fire on the security forces, triggering the encounter.
Senior police officials had rushed to the spot as a top commander of Lashkar-e-Toiba was believed to be trapped in the house.