The gunfight also left two soldiers martyred while unknown number of militants reportedly escaped from the spot.
The encounter had been going on since yesterday evening and two security personnel have lost their lives so far.
Earlier in the day, a joint cordon and search operation were conducted by the security forces, which were well planned as we trapped three terrorist in that area.More news: Chances for Rain, Storms Continue into the Weekend
The Army, police's SOG and CRPF had launched the operation in the hamlet, around 15 km from Shopian town, on Saturday afternoon after having inputs about the presence of militants.
"Injured police personnel have been referred to hospital", the spokesman said.
Police said the firing stopped late in the night but resumed early Sunday, when three rebels were killed.More news: Singer Bruno Mars donates $1 million to victims of Flint water crisis
"They emerged from the rubble after overnight lull and fired indiscriminately at our men".
Jammu and Kashmir police chief S.P. Vaid tweeted on the success: "One of terrorists killed today morning at Shopian is identified as Yasin Itoo; operational commander of Hizbul Mujahideen".
The slain Armymen have been identified as Tamil Nadu's Ilayaraja P, and Gawai Sumedh Waman from Maharashtra. A dozen stone-pelting protesters were injured in clashes with security forces in the area.More news: Four-midable Manchester United sweep West Ham aside in Premier League opener
SRINAGAR, Indian-controlled Kashmir, Aug. 13 (Xinhua) - At least two Indian army troopers were killed and three others wounded in an ongoing fierce gunfight with militants in restive Indian-controlled Kashmir, officials said Sunday.
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