The identity of the three is being ascertained. A civilian was killed in an accident near the encounter site, after a speeding vehicle hit him.
Minor clashes between protesters and the securitymen were reported from near the encounter site. The protesters were chased away by the police.
There is a heavy police deployment in the area. The militants were killed at Tabela Chattabal, near the Safakadal area.
A police official said a CRPF officer suffered minor injuries during the gunfight and was admitted to hospital.
"One person, identified as Adil Ahmad Yadoo, was brought to the SMHS hospital, where the doctors declared him brought dead. According to the medical bulletin, the man died in a road accident at Noorbagh," a police spokesman said.
However, locals alleged that Yadoo was shot at by the security forces.
The encounter broke out this morning after the security forces launched a cordon-and-search operation in the area, following inputs about the presence of militants there.
Officials said the militants opened fire on a search team of the security forces, who retaliated, triggering the gunfight.
Mobile Internet services have been suspended in Srinagar in the wake of the encounter.