Four Indian soldiers and three militants were killed in an exchange of fire in India-administered Kashmir on Sunday.
The gunbattle began after a Border Security Force (BSF) patrol team noticed suspicious movement about 3.5 km into India-controlled territory along the Line of Control (LoC) in Kupwara district, Defence Ministry spokesman Rajesh Kalia said.
The heavily militarized LoC is a de facto border that divides the disputed territory of Kashmir in two. One part is administered by India, the other by Pakistan.
A BSF trooper and a militant were killed in the initial exchange of fire which took place around 1 a.m. (0730 GMT), after which reinforcements were rushed to the site.
The heavy firing followed, in which three Indian Army personnel and two rebels were killed, Kalia said.
At least two soldiers were injured and have been evacuated. Operations, meanwhile, are continuing.
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Nuclear-armed neighbours India and Pakistan both claim the Kashmir region in its entirety and have fought two wars over it.
India routinely accuses Pakistan of aiding militants and helping them cross the border to carry out attacks in India-administered Kashmir.
Islamabad denies the charges and describes the militants as freedom fighters.
India-administered Kashmir has seen a deadly secessionist movement since the 1980s in which more than 45,000 people – civilians, security personnel and militants – have been killed.