At least two militants were killed when the army challenged a group of infiltrators in Bandipora district of the Kashmir Valley on Tuesday morning, a defence source said.
The exchange of fire began in Gurez sector when the militants were challenged on the Indian side of the LoC, source said.
"The operation against the intruding terrorists is going on," the source said at 11 a.m.
Earlier, Pakistan resorted to indiscriminate shelling and firing on the Line of Control (LoC) in two sectors of Jammu and Kashmir, a defence official said.
The Pakistani Army initiated the unprovoked firing in Bhimber Gali and Poonch sectors along the LoC, Defence Ministry spokesman Lieutenant Colonel Manish Mehta said.
The firing started at 6.45 a.m., using small arms, automatics and mortars. The Indian Army was retaliating "strongly and effectively", Mehta added.
The district administration in Rajouri has shut down 16 schools close to the LoC indefinitely. It has also ordered migration of the civilian population to safer places.
This was after a soldier and a child were killed on Monday in Pakistani shelling on the LoC in Rajouri.
In Uri sector too, a soldier and two civilians were injured in ceasefire violation by Pakistan on Monday.