A policeman was injured on Wednesday evening when terrorists opened fire on a search party in a village in Gandoh area of Jammu and Kashmir's Doda district, officials said.
The firing was reported from the Kota top area of Bhalesa around 7.41 pm to which security forces retaliated, they said.
An intermittent exchange of fire between the two sides was going on when last reports were received.
Reinforcements have been rushed to the area to strengthen the cordon, they added.
This was the second terror-related incident in Doda in the last 24 hours and fourth in three days in Jammu and Kashmir.
Earlier, on Tuesday evening, five Rashtriya Rifles personnel and a Special Police Officer were injured in a terrorist attack in Chattargalla pass.
In another incident late on Tuesday, a suspected Pakistani terrorist was killed by security forces in Kathua district. The overnight encounter ended after a second terrorist was also gunned down on Wednesday but a CRPF jawan lost his life in the operation.
On Sunday, terrorists attacked a bus carrying pilgrims, causing it to veer off the road and fall into a deep gorge in Reasi, killing nine and injuring 41.