The Police has requested citizens not to venture inside the encounter zone since such an area can prove dangerous due to stray explosive materials.
The official said as security personnel were conducting searches in the area, they came under heavy gunfire from militants hiding in the besieged area.
Police said the gun battle broke out between militants and security forces on the outskirts of Awantipora this morning following a tip about the presence of ultras in the area.
CRPF Constable Jaswant Singh, killed on Saturday by militants in Jammu and Kashmir, was cremated on Sunday with full state honours at his village near here in Haryana.
By afternoon, the security personnel neutralised one of the three militants while another militant's body was recovered after 5 PM, officials said, adding the firing had stopped.
Security forces launched a cordon and search operation in Gulab Bagh area of Tral in Pulwama after receiving specific inputs about presence of militants there, a police official said.
Although broadband Internet services on landlines were functional, the speed has been choked to prevent uploading of videos and large images.
Two persons were injured in the security forces action even as the clashes were going on till last reports came in.