Three guerrillas and the soldier were shot dead at Amirabad village, which has been under military siege for three days.

Two more rebels were killed by the army on Thursday during a raid on a rebel hideout at Kralpora village in the central Budgam district, army spokesman Vijay Batra told AFP.

"The firing has stopped but the operation is still on," he added.

At Amirabad, 40km south of summer capital Srinagar, paramilitary and police on Tuesday acted on a tip off that militants had taken refuge there.

"The operation is in progress as it is suspected that some more militants may be holed up in one of the houses," Batra said.

"Until Wednesday evening three militants and a paramilitary soldier were killed and two soldiers injured in the operation at Amirabad."

He identified one of the slain rebels as Ayub Naik, a senior commander of region's biggest group Hizbul Mujahedin.

"Naik was involved in number of killings and car-bomb explosions across the Kashmir valley," Batra said, adding that four houses were damaged when Naik, minutes before his death, set off improvised explosive devices.

However, residents reached by telephone said paramilitary forces fired rockets at the hide-out where the rebels were holed-up sparking a fire that destroyed the homes.

"Our children are suffering. There is no food and milk. We have no information about our cattle as we are confined to our houses," a Kashmiri man said, asking not to be named.