Police reached the spot over intelligence reports to investigate the killing of a Counter Terrorism Department official, when terrorists hiding inside opened fire at them, police said.
An exchange of fire resulted in the killing of two terrorists, police said.
Weapons used in the murder including two pistols were recovered from them, police said.
The slain alleged terrorists have been identified as Sohail Baloch alias Shooter and Sarfaraz alias Kala.
CTD Assistant Sub Inspector Shabab Haider was gunned down four days ago at Civil Lines area.
In a separate incident at Surjani Town police arrested two injured suspects in an injured condition and three others during a search operation.
Weapons were recovered from them, police said.
In another operation at Natha Khan bridge police arrested 10 suspects.
At Water Pump Chowrangi police arrested two suspects, and recovered weapons and a taxi from them.
Special coverage on China's Two Party Sessions by The Daily Mail - People's Daily