The encounter started last night.
Five terrorists were killed near Jammu and Kashmir's Kanzalwan village in the Gurez sector, the Army said today.
In the operation that started last night, security forces foiled an infiltration bid along the Line of Control (LoC) in north Kashmir's Bandipora district.
Defence Spokesman Lt Colonel NN Joshi told the Press Trust of India that post midnight, the troops posted on guard duty along the LoC intercepted the militants while they were trying to sneak into the Valley from across the border.
Rocket-propelled grenade launchers and AK47 rifles were recovered from the terrorists, the Army said.
The terrorists killed may have planned to attack a post on the Line of Control, the Army said.
In another ceasefire violation in Poonch, a soldier of the Indian Army was injured.