The troops engaged a group of infiltrators who sneaked into the state early in the morning in the northern district of Kupwara.
Military sources told IANS here that two militants were killed initially and two more guerrillas were gunned down later.
A soldier injured in the initial exchange of fire died.
The army noticed suspicious movement on the LoC at Tangdhar.
"When challenged, the infiltrating group fired at the soldiers, triggering a gun battle," a source said.
"The operation is still on but the infiltration attempt by the terrorists has been foiled," the source added.
On Wednesday, a solider succumbed to his injuries and a terrorist was shot dead by the army after militants infiltrated into Kupwara district, near Macchil sector.
Five soldiers were also reportedly injured in that operation.