The government forces in India-held Kashmir were locked in an intense battle on Sunday with armed militants who took cover in a school after opening fire on a group of soldiers on the eve of Eid, police said.

The militants ambushed a police patrol, killing one trooper and injuring two others in a hail of bullets, before fleeing into the nearby school on the outskirts of Srinagar.

Indian soldiers surrounded the school on Saturday evening as the militants continued firing on troops surrounding the campus, said Muneer Ahmed Khan, inspector general of police in Kashmir.

“The operation is continuing. We are... searching floor by floor, and room by room. It will take time,” he told AFP.

The battle comes as Kashmir prepares to celebrate Eid and the end of the Islamic fasting month, and just days after several bloody incidents in the restive region.

A policeman was beaten to death by an angry mob outside a mosque on Thursday, a week after suspected rebels ambushed a police patrol and killed six officers.

Violence between government forces and civilians has spiked in recent months in the disputed Muslim-majority region, where many oppose Indian rule.

The conflict has increasingly drawn in civilians, with whole communities sometimes coming out to throw stones at government forces as they fight militants.

On Saturday as troops battled the rebels, civilians rushed the scene chanting anti-Indian slogans and hurling rocks at the soldiers.

Authorities have barred people from coming within five kilometres of Saturday's shooting, and blocked the highway connecting the capital Srinagar with the restive Kashmir Valley to the south.

Officials say dozens of young men have joined rebel ranks since security forces killed a hugely popular rebel commander last July. It is expected violence could worsen around the anniversary of Burhan Wani's death.

Rights groups say 197 people have been killed so far this year in violent incidents, among them 55 civilians.

Kashmir has been divided between India and Pakistan since the end of British colonial rule in 1947 but both claim the territory in its entirety.

Rebel groups have fought for decades roughly 500,000 Indian soldiers deployed in the disputed territory, demanding independence or merger of the Himalayan region with Pakistan.

Tens of thousands, mostly civilians, have died in the fighting.

Five killed in gondola accident

Five people including two children were killed Sunday when a tree fell on a gondola at a ski resort in Indian-administered Kashmir, sending a passenger cabin crashing to the ground.

The gondola at Gulmarg is one of the world's highest, ferrying passengers to a height of 4,100 metres (13,450 feet) for panoramic views of the snow-clad Himalayas.

“Unfortunately one of the cabins fell after being hit by a tree. The dead included a couple, two children and a local guide,” a local police officer told AFP on condition of anonymity.

“We are trying to get more information. All other tourists are safe.” Gulmarg is the only ski resort in the restive Kashmir region, with tourists also visiting in the off-season for the views.

But visitor numbers have dipped in recent years amid unrest in the strife-torn region, with violence rising since the death of a popular militant leader last year.