Security forces in the Russian North Caucasus city of Nalchik have laid siege to a flat after coming under fire, Russian news agencies report, BBC reported.
An unknown number of militants are believed to be inside the apartment in a five-storey residential building, a law enforcement source told Interfax.
They opened fire when security forces moved in around midnight (2000 GMT) and called on them to surrender.
Residents in the area were evacuated as security forces took up position.
The siege is under way at a flat on the city's Tyrnauzskaya Street, sources said in Nalchik, capital of the Russian republic of Kabardino-Balkaria.
An unnamed law enforcement source told Ria-Novosti that both police and Federal Security Service (FSB) officers were involved in the operation to detain "members of illegal armed groups".
Since the 2004 school siege at Beslan in neighbouring North Ossetia, Russia has repeatedly targeted what it says are Islamic extremists operating in Kabardino-Balkaria.
Nalchik saw its most dramatic militant attack in October 2005, when fighters linked to Chechen separatists staged a large-scale, armed assault on government buildings.
Russia responded swiftly, deploying hundreds of troops and special forces.
An extensive FSB-led operation against militants has been under way in Kabardino-Balkaria since 30 June, focusing on the area around Elbrus, Europe's highest mountain.
Since 2007, 32 attacks on law enforcement agencies have occurred in the Elbrus area, according to the Russian authorities. Nine policemen were killed and 27 wounded in the attacks.