The firefight took place in the Zoonimar area of the densely populated old city of Srinagar, a police officer who asked to remain anonymous told AFP. One home was destroyed during the clash.
Indian Occupied Jammu and Kashmir has been in turmoil since last August, when New Delhi revoked its semi-autonomous status and imposed a communications blackout that has not been fully lifted.
Pakistan summons Indian diplomat to condemn truce violations
Pakistan criticised the change in IOJ&K's status, and there have been frequent exchanges of fire across the heavily militarised Line of Control.
On Sunday, Pakistan's Ministry of Foreign Affairs said it had summoned the Indian charge d'affaires "to register Pakistan's strong protest over the ceasefire violations" that, it said, led to the death of a teenage resident on Saturday. Two other civilians including a child were seriously hurt, the ministry said.
The clash in Srinagar was the second such encounter in the old city and brought the death toll of freedom fighters to more than 100 this year.
Just over a month ago, the son of a top Kashmiri leader and his associate were martyred in the city.
The May incident -- a day-long firefight that saw 15 homes blown up by police and soldiers -- was the first armed encounter between freedom fighters and Indian occupied forces in Srinagar in two years.
Freedom groups have fought for decades for the region's independence or its merger with Pakistan, and they enjoy broad popular support.
The fighting has left tens of thousands dead, mostly civilians, since 1989.
India has more than 500,000 troops stationed in occupied Jammu and Kashmir. The countries have fought two of their three wars since independence over the region.
India also has a frontier dispute with neighbouring Nepal and tensions with China that last week left 20 Indians dead after a fight with nail-studded batons, rocks and fists. There were also an unknown number of Chinese casualties.
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