Updated

Police say suspected Kashmiri rebels have shot and killed one Indian policeman and wounded two army soldiers in a fierce gunbattle in the Himalayan territory.

Top police officer K. Rajendran says the fighting started Thursday after government forces intercepted two suspected militants taking shelter in Kunzar, a village in the Indian portion of Kashmir.

An exchange of gunfire is continuing with attackers holed up in two village homes, 35 kilometers (20 miles) north of Srinagar, the main city in the Indian-held area.

Kashmir is divided between India and Pakistan. Muslim rebels have been fighting against Indian rule since 1989. More than 68,000 people, mostly civilians, have been killed in the uprising and Indian military crackdown.

India accuses Pakistan of arming and training the insurgents, a charge Islamabad denies.