Seven people, including two policemen, a Central Reserve Police Force jawan and a militant, were killed in an encounter in Poonch town, Jammu, on Friday afternoon.

Jammu range police chief P L Gupta told rediff.com that on a tip-off a team led by Deputy Superintendent of Police Manjeet Singh raided Hotel Anand near the main bus stand in the town.

"The police had information about the presence of militants inside the hotel. As the policemen reached there, the militants lobbed grenades and opened fire on them, resulting in injuries to Manjeet Singh and another cop," he said.

The two succumbed to their injuries while being taken to hospital, he said.

The CRPF jawan, who was also injured, died in hospital, he added.

When the firing stopped in the evening, the security forces entered the building and recovered bodies of three civilians and the militant, he added.

It was not clear how many militants were involved.

Six seriously injured civilians were brought to Jammu for treatment, the official said.

The incident triggered panic in the area and shopkeepers pulled down their shutters.