According to reports, two unidentified militants were also killed in retaliatory firing.
For decades militant groups have fought roughly 500,000 Indian soldiers deployed in the territory, demanding independence or a merger of the former Himalayan kingdom with Pakistan.
"Militants are said to have sneaked inside the camp premises at around 3:45 a.m (local time) today", a police official said. The identity is yet to ascertained, director general of police S.P. Vaid said.
Some security personnel were also injured.
Airport officials told the BBC that flight operations are on hold and no employees, passengers or vehicles are being allowed to go towards the airport.
More than 70,000 people have reportedly been killed in the conflict since 1989. "One more militant is believed to be now holed up inside a building, and an operation is underway", a police official said. The particular battalion handles the security of runway at the airport.
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Police said security personnel sealed all possible escape routes as a major operation jointly carried out by the Army para commandos, BSF, Central Reserve Police Force (CRPF), and state police was launched to flush out all the attackers.
A police official said, 'the third terrorist is also believed to have been neutralized but the search operation is going on'.
"Six or seven Jaish militants are still at large", Inspector-General of Police (Kashmir) Muneer Khan said.
The camp is located just outside the global airport in Srinagar - a heavily fortified area.
New Delhi says Pakistan initiates cross-border firing to help anti-India elements cross into IoK Kashmir.
"I have spoken to the DG, CRPF, and DG, BSF".