Two militants were killed in an encounter with security forces in Nowgam area of the city on Wednesday, police said.
Security forces launched a cordon and search operation in the city on information that some militants had sneaked in the area.
The militants opened fire on security forces, triggering a gunbattle in which two ultras were killed.
A police official said locals have been told not to go near the operation site till the area has been santised.
Authorities have snapped mobile Internet services in the city and shut educational institutions as a precautionary measure.