Jaish-e-Muhammad (JeM) outfit has claimed responsibility for the attack.
The terror strike took place at the crack of dawn when the militants, believed to be foreign mercenaries, entered the police complex in the worst-hit Pulwama district.
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A policeman and three CRPF personnel were also wounded in the stand-off. Reportedly, one policeman belonging to the Qazigund area of south Kashmir was also killed in the attack.
A police official said they are investigating whether the militants had recently infiltrated into Jammu and Kashmir. The authorities have suspended mobile internet services in the district as a precautionary measure.
JeM spokesman Hasan Shah said that its men had carried out the attack.
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The militants are now holed up in the complex, with no hostage situation being reported.
Kashmiri resistance groups in Jammu-Kashmir have been fighting against Indian rule for independence, or for unification with neighboring Pakistan. It was the deadliest on a state security facility since September past year, when armed militants broke into an army camp in Uri near LoC - the de facto border with Pakistan - killing 18 army personnel. Two quarters within the premises were in flames as reports last came in. "His body is lying near a building?" the official added.
"We lost four of our CRPF jawans, Jammu and Kashmir Police lost one constable, and three Special Police Officers (SPOs)", Inspector General of Police CRPF Ravdeep Shai told Outlook.
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"We are probing whether it was a security lapse", he said.