The raid by two fighters took place at 5.30am (0000 GMT) on Saturday in the Nowgam area, 100km north of Kashmir's summer capital Srinagar.
An Indian officer was among the dead, a police spokesman said.
Two Mujahidin rebels hurled grenades and fired automatic weapons at the guards on duty as they stormed the gates, the Kashmir Media Service reported.
Once inside the camp, their shooting spree continued until one guerrilla was shot dead by troops, police said.
The other attacker managed to escape and troops were combing the densely forested region to try to hunt him down on Saturday.
The army camp is situated very close to the disputed Line of Control (LoC) - the de facto border which divides Kashmir into Indian and Pakistani administered regions.
Elsewhere in Kashmir, Indian security forces claimed to have shot dead 10 suspected Islamic rebels in three different incidents overnight, a police spokesman said.
Incessant attacks by Kashmir
The latest killings bring to at least 159 the number of people who have died in Kashmir in an explosion of violence since Indian troops shot dead top rebel commander Gazi Baba in Srinagar on 30 August.
Baba, a Pakistani, had been on the list of most wanted rebels after India accused him of masterminding an attack on its parliament in December 2001 that killed 15 people, including the five attackers, and triggered a military standoff with Pakistan.
In one of the overnight incidents, Indian troops surrounded a village in the Sumbhal area of northern Baramulla district after receiving a tip-off about the presence of three rebels.
"As they (army soldiers) closed in on a house where the three militants had taken refuge the besieged militants opened fire," the spokesman said, adding that troops returnedfire and killed all three fighters.
In another incident, four rebels were killed in Tangdar area of Baramulla district while trying to cross into India-administered Kashmir from the Pakistan-administered zone, he said.
Another three Muslim guerrillas were killed and three Indian soldiers injured in the Kalaroos area of Kupwara district, he said.
Police in Kashmir also said Saturday that Pakistani troops had shelled the Karna sector of Kupwara district along the LoC about 130km northwest of Srinagar.
Meanwhile, a former fighter who broke ranks and joined Indian security forces to combat separatists in Kashmir was on Saturday killed in an attack on his motorcade, police said.
The attack by Islamic fighters on Mohammed Yusuf alias Kukkay Parrey, which also killed two of his associates and injured two others, occurred in his home constituency Hajin, 40 km north of the summer capital Srinagar.
Muslim-majority Kashmir has been at the heart of decades of rivalry between the nuclear-armed neighbours, India and Pakistan, which went to the brink of a fourth war in 2002.
A former lawmaker, Yusuf was getting into his vehicle at around 3:20 pm (09:50 GMT) after watching a cricket match when fighters hurled a grenade and opened fire at him, police said.
He and the two associates died en route to hospital.
Yusuf led the Awami League, the political wing of Ikhwan - a pro-government armed group which was formed in 1994 to assist security forces in counter-insurgency operations.
Before joining politics in 1996, Yusuf headed Ikhwan. He lost the election in 2002 and was regarded as the "master of counter-insurgency" operations, police said.
Yusuf was one of the topmost targets in the separatists' hitlist, police said.
More than 38,000 people have died in Indian Kashmir since the launch of an anti-Indian insurgency in the region in 1989 by Muslim guerrilla groups. The separatist rebels put the toll between 80,000 and 100,000.
Muslim-majority Kashmir has been at the heart of decades of rivalry between the nuclear-armed neighbours, which went to the brink of a fourth war in 2002. Mainly Hindu India has long accused majority-Muslim Pakistan of supporting the rebels. Pakistan denies the charge.
Ties between the two-nuclear capable neighbours have improved slightly in recent months but India has linked fresh talks to an end to attacks by separatists.