The incident took place in Jamrud area of Khyber, one of seven tribal districts, along border with Afghanistan.
In a statement, the army said four terrorists were killed in the clashes, while three Khassadar force personnel died.
Khasadar is a security force of tribesmen which performs most of the policing duties in the semi autonomous tribal areas.
Khyber is one of the hotbeds of the Taliban who frequently clash with security forces.
Army frequently targets their positions through jets and helicopter gunships.
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