Police opened fire after coming under attack from smugglers in a forest area in the district, about 600km from here.
A group of around 50 smugglers attacked a police party with axes while they were on a combing operation in Seshachalam forest under Bhakarapet police station limits.
"The incident occurred deep in the forest where the combing is still continuing to nab the smugglers who fled from the scene. At least two red-sander smugglers are suspected to have been injured in the firing," a police officer said.