Government forces on Tuesday morning resumed operation against militants hiding inside a government building near Pampore town of Kashmir's Pulwama district.
Two forces personnel and a policeman were injured as the militants fired from inside the Jammu and Kashmir Entrepreneurship Institute (JKEDI) in the fighting that began on Monday.
"Operation against the holed up militants has been resumed. Floodlights were used during the night to ensure that the militants were prevented from escaping under the cover of darkness," a senior police official said.
Rockets and heavy automatic gunfire were used on Tuesday morning to engage the militants.
The 70-room, seven-storey building is located at Pampore on the banks of the river Jhelum and 12 km from the Srinagar city centre.
The joint operation was launched by the army, the Special Operations Group of the state police and the Central Reserve Police Force (CRPF).
The main building of the institute was attacked in February when militants captured it and launched a major attack on forces. Six persons – a civilian, three soldiers and two paramilitary troopers — were killed then before three militants were shot dead.