In a simultaneous gunbattle in another village in the district, two unidentified militants were killed, officials said.
Anticipating a law and order problem, mobile internet services were suspended and strict restrictions imposed on the movement of people.
Riyaz Naikoo, operational commander of the banned Hizbul Mujahideen, has been trapped in Beighbora village in Pulwama, officials said.
A police spokesperson said earlier in the morning that a top terrorist commander along with an accomplice was trapped in an encounter but did not reveal his identity.
Later in the day, officials disclosed that the man in their sights was Naikoo, who carries a reward of Rs 12 lakh. They had been looking for him for eight years.
Naikoo became the de facto chief of the terror group after the death of Burhan Wani, the poster boy of militancy in the Valley, in July 2016.
Naikoor had managed to escape the police dragnet thrice in Shopian in south Kashmir.
Declining to give details, officials only said they had launched a plan to nab Naikoo after establishing his presence in the village and wanted to ensure he did not escape this time.
They said details would be shared after the encounter was over.
In Sharshali village, two militants who are yet to be identified were gunned down in an encounter with security forces.
Acting on a tip-off about the presence of militants in the village, security forces launched a cordon and search operation. It turned into an encounter after militants opened fire towards security forces’ positions, officials said.
In the retaliatory firing, two militants were killed, they said.
