Tariq Ahmad Khan and Mohammad Aslam Khan, both residents of Pulwama, were arrested with 150 gm of 'charas' and Rs 4,300 in cash, police said.
Acting on a tip-off, police established a check-point at Kellar area of the district and during checking Khan and Aslam were intercepted, a police spokesman said.
He said during questioning the duo revealed that there were some other smugglers involved in selling of narcotics among the youth of the area.
Police have launched a manhunt to nab other smugglers, the spokesman said, adding a case has been registered under NDPS ACT and investigation taken up.