Lt Col Devender Anand, Public Relations Officer, Defence, Jammu said, the encounter took place between the terrorists and army personnel and police in Gondana belt of the district.
Information had been received by the security forces about the presence of terrorists in the area, said the officials.
Hizbul Mujahideen's Haroon Wani, an ultra level terrorist was killed in the furious gun battle. Wani belonged to the Gattah belt of the district, Deputy Inspector General of Police, Doda-Kishtwar-Ramban Range, Sujit Kumar, said.
He said another terrorist has fled towards higher snow-bound areas and tracking operations has begun.
Kumar said an AK-47 rifle, three magazines, 73 rounds, a Chinese grenade and a radio set have been recovered.