Police assisted by army launched a cordon and search operation at Marseri village in Chowkibal area following specific information about a group of militants hiding in a house, officials said.
Soon after the cordon was established, the search party came under fire from the hiding militants.
The security forces returned the fire, they said.
The encounter was underway when last reports were received, the officials said.
So far, there has no report of any casualty in the gunbattle, they said.