Protesters pelting stones at the security forces even as two-to-three LeT militants reportedly remained holed up inside the house.
A police official said the gunfight broke out in Wani Mohalla area of Khudwani, Kulgam, 65 kms from here, at 11 pm on Tuesday after security forces launched a cordon-and-search operation. However, when the security forces were sealing the area, militants hiding there, opened indiscriminate firing with automatic weapons. Later one of the them, an Army jawan, succumbed to injuries, the officials said.
Doctors said a civilian, Faisal Elahi, 15, was brought to a hospital in Qaimoh town in Kulgam district and he succumbed to critical bullet injuries. However, the warnings went unheeded and four civilians were killed, they said.
The nuclear-armed South Asian rivals have fought two of their three wars over the divided Himalayan region.
The slain soldier has been identified as 24-year-old Sada Gunakara Rao, a resident of Atisurikaviti village in Andhra Pradesh's Srikakulam district.More news: Russian Federation call United States sanctions on business entities "erroneous"
The latest civilian killings has added to the tensions prevailing in Kashmir following last weekend's violence in which five civilians and 13 militants were killed by security forces.
Student protests rocked Kashmir University in Srinagar, the Islamic University of Science and Technology in Awantipora in south Kashmir and Degree College in Bandipora in north Kashmir.
Under pressure, the PDP condemned the civilian killings."Civilian killings in Kulgam are unfortunate, and the party strongly condemns it", tweeted PDP spokesman Rafi Ahmad Mir.
Senior separatist leader Mirwaiz Umar Farooq said Kashmiris were "left with no option other than to come out on roads" to protest.