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Acting on specific inputs about the presence of militants in the Zakura locality of the city, security forces launched a cordon and search operation there during the night, a police official said.
He said as the forces were conducting searches in the area, the hiding militants fired upon them.
The forces retaliated and an encounter broke out.
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Inspector General of Police (IGP), Kashmir, Vijay Kumar said the ultras belonged to The Resistance Front (TRF), a shadow of the LeT.
One of the terrorists was involved in the killing of a head constable, Ali Mohammad Ganie, in Anantnag on January 29.
“Two terrorists of terror outfit LeT/TRF neutralised by Srinagar Police. One of the killed terrorists Ikhlaq Hajam was involved in recent killing of HC Ali Mohd at Hassanpora Anantnag,” the IGP Kashmir said on Twitter.
Incriminating materials, including two pistols, were recovered from the site of the encounter, Kumar added.