A large group of heavily-armed militants was trying to sneak into the Gurez Valley from Pakistan-occupied Kashmir (PoK) when they were noticed by troops, official sources said.
They said the militants were challenged by the soldiers, leading to a gunbattle which was going on till reports last came in.
A defence spokesman said heavy exchange of firing was going on between the two sides.
"So far there are no reports about any casualties.Further details are awaited," Defence Spokesman Lt Col J S Brar said.
Attempts by militants to infiltrate from PoK into the Valley have increased as the natural passes along the LoC will be soon closed with the onset of winter.
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