The encounter continued till early morning, and one JeM cadre was identified as Noor Mohammad Tantray.
The deceased commander was called Chhota Noora, as he was just four feet two inches tall and was responsible for reviving the JeM in Kashmir.
But one police source said two of Tantray's associates had managed to escape.
They said security forces and SOG of state police on a tip off about the presence of militants launched a joint search operation at Samboora, Awantipora, in Pulwama at 0030 hrs late last night.
The house, where Noor was staying, was completely destroyed as government forces used heavy ammunition to fight the militant commander.
Onlookers at the site of encounter where JeM's top terrorist Noor Tantray was killed in Pulwama.More news: Sid Meier's Civilization VI Now Available on the Apple iPad
"It was a clean operation based on specific intelligence inputs", Jammu and Kashmir's Police Director General Shesh Paul Vaid said. There was input about the presence of 2/3 militants near NHW planning to attack a convoy.
He was one of the chief architects of the attack on a BSF camp near Srinagar airport in October, the spokesman said, adding that he was also wanted in connection with a number of terror attacks in south and central Kashmir. He was a convict in a case registered in 2003 in Delhi and was serving his sentence at Central Jail Srinagar until he was released on parole in 2015.
According to the police, Tantray remained in Tral and became a major overground worker of the JeM.
This information was developed further and it was during this course that we came to know that a most wanted JeM terrorist, who was the mastermind behind nearly all the attacks carried out by the group, was hiding in Samboora.
Violence has ebbed and flowed in Indian-administered Kashmir since 1989 but the region has seen a fresh wave of unrest following popular militant leader Burhan Wani's killing by Indian forces in July 2016.
The gunfight broke out in village Samboora of Pulwama district, 28 km south of Srinagar city, the summer capital of Indian-controlled Kashmir.