The gunfight broke out early morning in forests of Kramhoora of Handwara in Kupwara district, around 105 km northwest of Srinagar city, the summer capital of Indian-controlled Kashmir.
Officials said the contingents of the Indian army and police cordoned off the forest area on specific intelligence inputs to take on militants present there.
"Five militants were killed in a gunfight today in the forests of Handwara of Kupwara district," said Lt. Col J S Brar, an Indian Army spokesman in Srinagar. "They were asked to surrender but they opened fire resulting in an intense standoff."
The firing continued until late evening, reports said.
Searches in the forest area are underway and identity of the slain militants is being ascertained.
"Police are ascertaining the identity of the slain militants," said Brar.
Last week five militants of the Lashkar-e-Toiba (LeT) militant outfit were killed in the area. LeT is accused of carrying out the 2008 Mumbai attack that claimed 165 lives.
The gun fighting between militants and Indian army troopers in Indian-controlled Kashmir takes place intermittently.
A guerrilla war is going on between militants and the Indian troops stationed in Indian-controlled Kashmir since 1989. A strong separatist movement is going on in the region seeking the end of New Delhi`s rule.
Kashmir, the Himalayan region divided between India and Pakistan is claimed by both in full. Since their independence from British, the two countries have fought three wars, two exclusively over Kashmir.