A senior police officer said troops belonging to 6 Rashtriya Rifles surrounded the Hafruda forest area on Sunday evening on specific information about presence of a group of terrorists there.
"As the security forces were busy combing the forest area, the terrorists opened heavy fire triggering a gunfight,” he said.
A defence spokesman told rediff.com that four army troopers were killed in the ongoing operation.
"The operation is still on,” Lt Col N N Joshi said.
More reinforcements have been rushed to the area to strengthen the cordon.
Meanwhile, one terrorist was killed in another gunfight in the Darpora village in the same district.
On Sunday, security forces had gunned down two Jaish-e-Mohammad terroists in south Kashmir's Pulwama district.