In a statement, issued after Home Minister Rajnath Singh reviewed the security situation in the state, the ministry said the terrorists had been cornered in a set of government quarters and action to flush them out was in process.
"The exact number of terrorists is still not known and the two SPOs of Jammu and Kashmir are trapped in the building where the terrorists have been cornered," it said.
The meeting, attended by NSA Ajit Doval, Union Home Secretary Rajiv Mehrishi and others, reviewed the ongoing encounter in Pulwama.
Mehrishi told reporters that the meeting discussed the Pulwama attack in which two CRPF personnel and one Jammu and Kashmir policeman were killed.
He said it was not yet clear how many terrorists were there--whether two or four terrorists.
The home secretary said there were two SPOs on the sport but their fate is not known immediately.
"Two SPOs were there. We are not sure whether they are safe. Some danger to their lives still exists," he said.
Militants launched a major pre-dawn attack on a district police complex, triggering a massive gunfight in which one of them died while three others were still holed up after nearly 12 hours.
The compound houses many residential buildings.
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