Acting on an intelligence input about presence of ultras in village Kangan, 35-km from Srinagar, security forces launched a search operation in the area last evening, they said.
As they zeroed in on their target, the militants fired at security forces who retaliated, police said.
In the ensuing gunfight, a militant identified as Ajaz Ahmad Bhat was killed, they said.
Bhat, affiliated to the LeT outfit, was involved in a number of terrorist activities including the firing incident at Awantipora market in which two civilians, including a woman, were injured, police said.
Some arms and ammunition were recovered from the scene, they said.