Two soldiers and three suspected militants were killed in an overnight gun battle in India-held Kashmir (IHK), officials said on Sunday, in the latest bloodshed in the disputed Himalayan territory.

Hundreds of Indian soldiers and counter-insurgency forces surrounded Awneera, a village about 50 kilometres south of the main city of Srinagar, on Saturday evening following a tip-off about allegedly armed militants in the area.

A fierce firefight broke out in which three suspected militants and two soldiers were killed, army spokesman Colonel Rajesh Kalia told AFP.

A police officer, speaking on condition of anonymity, said the 'militants' were identified as locals.

As news of their death spread, hundreds of residents from neighbouring villages took to the streets in protest, throwing stones at soldiers and chanting slogans against Indian rule.

In a separate incident early on Sunday, militants fired at an army convoy in the northern area of Hajin and injured two police officers and a soldier, the same police officer said.

On Saturday a civilian and a soldier were killed in gunfire between Indian and Pakistan soldiers along the Line of Control.

At least 130 suspected militants and 39 soldiers have died in clashes so far this year, officials say.