The attack took place near the ADI building where police and the armed men engaged in crossfire, Indian media reported.
Two to three gunmen are hiding inside a government building, reports said.
Fire broke out in the building following the attack and a fire brigade has been dispatched to the site, media reports said.
Police has cordoned off the area and is conducting a search operation, reports added.
Additional contingent of troops have been called.
In February this year a similar attack in Pampore killed seven people including three soldiers
In September an attack at an Indian military base in Uri 18 soldiers were killed.
Special coverage on China's Two Party Sessions by The Daily Mail - People's Daily