A Tamil Nadu policeman was injured Saturday when militants reportedly holed up in a house in Andhra Pradesh's Chittoor district opened fire, police said.
Tamil Nadu police personnel were targeted while conducting a search operation in a residential area in Puttur town, 30 km from the temple town of Tirupati and close to the Tamil Nadu border.
Police said a gun and two bombs had been recovered.
Policemen from both Tamil Nadu and Andhra Pradesh have surrounded the house, where four to five alleged militants are believed to be hiding.
According to locals, the group had taken the house on rent about a month ago.
A police officer in Hyderabad said personnel from OCTOPUS, the anti-terror wing of the Andhra Pradesh Police, were being sent to Puttur.
The Tamil Nadu Police launched a search operation in the residential area early Saturday.
A tip off about the hideout emerged during investigations into the murder of Bharatiya Janata Party leader V. Ramesh in Salem and other Hindu leaders in Tamil Nadu.
On Friday, the Tamil Nadu Police arrested Fakruddin, who was wanted for allegedly planting a "pipe bomb" in Madurai when BJP leader L.K. Advani was touring the state.