Indian security forces have been battling a group of fighters inside a government compound in the Indian-administered portion of Kashmir, according to local police sources.
Police told the Associated Press news agency on Monday that army and paramilitary soldiers cordoned off the compound after shooting was heard near Pampore town, about 10km outside of Srinagar, the capital of the Indian state of Jammu and Kashmir.
One Indian soldier was reported wounded in the initial fighting.
Sources told Al Jazeera that at least two fighters are holed up inside the Entrepreneurship Development Institute (EDI), and that intermittent shooting could be heard in the building.
Scores of people gathered on nearby streets to chant anti-India slogans in a show of solidarity with the fighters.
Late Monday, government soldiers launched what officials described as a “final assault” on the building, firing rockets, flame throwers and grenades to “neutralise militants”, an officer told AP news agency.
Smoke billowed from the multistorey building as the building caught fire in the raging battle.
In February, five soldiers, three militants and a civilian were killed in a three-day standoff in the same government compound.
The attack comes as Kashmir is experiencing its largest protests against Indian rule in recent years, prompted by the killing in July of a young separatist fighter by Indian soldiers.
The protests, and a sweeping military crackdown, have all but paralysed life in the region, with shops, schools and most banks remaining shut and mobile phone and internet services working intermittently.
Kashmir has been divided between rivals India and Pakistan since the end of British rule in 1947. Both claim the territory in full.
Anti-India sentiment runs deep in Kashmir, where armed groups have fought Indian troops since 1989 for either independence or a merger with Pakistan. More than 70,000 people have been killed since then.
Tension between the nuclear-armed neighbours has soared after an armed attack last month on an Indian army base killed 19 soldiers with the two armies exchanging heavy fire and mortars across their de facto border in Kashmir almost every day.
Anxious to quell anti-India protests in the region, Indian forces are carrying out their most severe crackdown in more than two decades against civilian protesters, arresting according to police sources more than 8,000 this summer.
That includes 450 or so civilians being held, possibly for up to six months without trial, under a harsh security law criticised as a human rights violation.
India has said the separatist rebels – and civilians who help them – are undermining the country’s territorial integrity and forcing authorities to keep the India-controlled portion of Kashmir under tight control.
“This is, so far, the biggest crackdown against miscreants,” a senior police officer told AP, requesting anonymity because he was not authorised to share details of the crackdown.
For weeks, Indian authorities have carried out night-time raids, rolling curfews and stops at roadblocks, but have failed to stop the rebel attacks and angry public rallies.