At least 90 people have now died in Indian-held Kashmir in the week after top rebel commander Gazi Baba was killed by troops on 30 August.
Heavily armed rebels late on Saturday ambushed an army patrol in the village of Chandakoot near Sopore town, 50km north of the summer capital Srinagar.
The separatists killed a junior commissioned officer and injured two soldiers, police said. The area was immediately sealed off but no arrests were reported.
One of four Indian army soldiers injured on Friday during a similar ambush on their patrol in the neighbouring Rafiabad area died in Srinagar's military hospital on Sunday, police said.
At another Srinagar hospital, six-year-old Zeeshan Ahmed died from injuries on Tuesday from a landmine in southern Kashmir, police said. Another civilian was killed in that blast and 21 other people, including six soldiers, were injured.
Gurkhas hunt rebels
Meanwhile, the Indian army Sunday sent 500 Gurkha soldiers into the thick forests of southern Kashmir where seven militants have held up hundreds of soldiers since Tuesday.
The firefight began after security forces launched a mopping operation against the fighters in woods near Ghati village in southernmost Kathua district.
They had been tipped off by a local resident who had escaped after being captured by the rebels, reported Aljazeera's Kashmir correspondent Yusuf Jameel.
After three days of intense gunfire the encounter has been punctuated by periods of lull. The firing stopped on Friday morning and the security forces believed that either the fighters had been killed or exhausted their ammunition.
But as they got closer the rebels opened fire forcing a force of over 300 soldiers and police personnel to retreat. Sniffer dogs were also pressed into service at the weekend.
Police believe the fighters have made makeshift shelters behind rocks and bushes within an area spread over two square kilometres.
They are using heavy weapons including grenade launchers and AK-47 assault rifles to keep the advancing forces at bay.
At least 90 people have died in a
week of rebel-linked resistance
The dense foliage had reduced visibility to three metres and troops were treading carefully in case the fighters had planted explosives, said Faruq Ahmed, a senior police official.
Brigadier Atul Gupte, who has supervised the military operation since Tuesday, said troops Sunday were focusing on the forests of Gatti, 85km east of the winter capital Jammu, and had discovered bloodied clothes.
"Possibly a rebel who was wearing the clothes got killed by our firing and his fellows may have buried him in the forest," said Gupte, who said sniffer dogs had been brought in.
Officials said the Gurkhas, a battle-hardy Nepalese people known for their warfare with the British military, had been employed as they had experience in guerrilla warfare.
The Kashmir insurgency has claimed more than 38,000 lives since 1989, according to Indian officials, or between 80,000 and 100,000 according to separatists.