A fresh encounter erupted as security forces widened their cordon and search operation to flush out terrorists hiding in Jammu and Kashmir's Rajouri district on Wednesday, a senior police officer said.

A suspected Pakistani terrorist was killed in an encounter in the remote Narla village on Tuesday. An Army personnel and Kent, a six-year-old female Labrador of the Army's dog unit, also died while three security personnel were injured in the gunfight.

Additional Director General of Police (Jammu Zone) Mukesh Singh said a fresh encounter erupted when security forces established contact with the terrorists on Wednesday.

Firing is underway between the two sides and further details are awaited, he said.

Despite bad weather, security forces laid a strong cordon around the area, 75 kilometres from Rajouri town, throughout the night and extended the search to nearby areas in the morning, officials said.

Intermittent firing was reported during the night but there were no reports of any fresh casualties, they said.

The security forces launched a cordon and search operation in the forested Patrada area on Monday and fired a few rounds after noticing the suspicious movement of two people, the officials said.

However, both the suspects managed to escape under the cover of darkness and the thick foliage. They left behind a rucksack and some clothes and other articles that were recovered by the search parties.

A defence spokesperson said a brave Army dog lost its life while saving its handler during Tuesday's gunfight.

"The Army dog, Kent, was at the forefront of Operation Sujaligala. Kent was leading a column of soldiers on the trail of the fleeing terrorists. She came down under heavy hostile fire. While shielding her handler, sher laid down her own life in the best traditions of the Indian Army," the spokesperson said.

On September 4, a terrorist was killed and two security personnel were injured in nearby Gali Sohab village in the Chassana area of Reasi district.

The border districts of Rajouri and Poonch have witnessed several encounters this year, resulting in the deaths of about 26 terrorists and 10 security personnel.

Most of the terrorists were killed while attempting to sneak into this side from across the border, the officials said.