Police sources said that militants travelling in a vehicle, which was on its way from Jammu to Srinagar, fired on the security personnel near the Toll Plaza at Ban area.
The slain militants were identified as Irfan Ahmad Thoker, resident of Kutpora, Shopian and Umer Ahmad Lone, resident of Naidgam Lone Mohallah.
During the operation, militants were asked to surrender but they opened fire on the troops.
The police busted a network of over-ground workers of militants, who were providing logistical support facilitating terror attacks.
An encounter broke out between security forces and militants in Jammu and Kashmir's Srinagar on Monday, police said.
Four militants were killed in two separate encounters with security forces in Kulgam and Pulwama districts of Jammu and Kashmir.
In the exchange of fire, two militants were killed, the officer said, adding their identity and group affiliation is being ascertained.
IGP Kashmir spoke to reporters after the wreath-laying ceremony for the two CRPF jawans, who were killed in the attack.
A CRPF official said militants fired from their automatic weapons towards a Road Opening Party (ROP) of the CRPF at Kandzal area of Pampore in Pulwama district in the afternoon
Incriminating material, including arms and ammunition, were recovered from the site of the encounter, the official said.
Militants fired towards CRPF guards deployed at Mini Secretariat Shopian.
A CRPF personnel was injured in an encounter between militants and security forces in Budgam district of Jammu and Kashmir.
They said those arrested are residents of south Kashmir and in the 19-25 age group.
Police said that the three Hizbul Mujahideen militants was involved in several attacks in Srinagar and South Kashmir.
The security forces recovered an AK rifle with ammunition, two grenades, Rs 7 lakh in cash, and other war-like stores from them.