Another terrorist is believed to be trapped in the joint operation of security forces. The area meanwhile has been cordoned off.
Internet services have also been suspended.
As the operation is still underway more details are awaited.
Earlier this week, an encounter broke on February 28 around 3 pm which continued for 72-hours and ended on March 3 at around 4 pm.
Based on credible input about the presence of terrorists in Baba Gund area of Kralgund in Handwara, a search operation was launched jointly by local police and the security forces. Following which gunfire was triggered which continued for three days.
In the encounter, five security personnel and one civilian were killed in the exchange of gunfire.
Two terrorists affiliated with Lashkar-e-Taiba, including one Pakistani national were also killed in the encounter.
According to a report 10 to 12 houses were bombed by armed forces eight others were partially damaged.
Meanwhile, two terrorists were also killed on Tuesday in Tral area of south Kashmir district of Pulwama. One civilian was also injured during the exchange of gunfire.
The security situation is tense in Jammu and Kashmir since February 14 after over 40 CRPF personnel were killed in a terrorist attack in Pulwama district.
Masood Azhar led Jaish-e-Mohammed, listed by the United Nations as a terror group, had claimed responsibility for the attack.
The Friday's encounter comes days after the 72-hour long encounter in Kupwara district Handwara.