"Hilal Molvi of LeT was killed in an encounter with police in Narparistan (Fatah Kadal) area of old Srinagar city," Syed Ashiq Bukhari, senior superintendent of police (SSP), Srinagar, told IANS.
Three police officials -- one sub inspector and two constables were injured in the gunfight, he said.
The shootout started in the early hours of Thursday after police surrounded a residential house in the densely populated area on receiving specific information about the militant's presence there.
"The militant started firing from his automatic weapon on our boys after he was asked to surrender."
"The fire was returned, in which Hilal Molvi was killed. He belonged to Palhalan (Pattan) town of Baramulla district and had been active since last four to five years," the SSP said.
The Srinagar district police chief confirmed there was no collateral damage to civilian life or property during the gunfight.
The presence of an LeT militant in Srinagar comes at a time when the state government has again raised its demand for partial revocation of the Armed Forces Special Powers Act (AFSPA) from Srinagar city and some other places.
AFSPA gives sweeping powers to the army and the paramilitary forces operating in militancy-affected areas, but the local police does not enjoy any immunity under the act.
Chief Minister Omar Abdullah has been advocating the partial revocation of the act, maintaining that security responsibilities in cities and towns can now be taken over by the local police with the assistance of the Central Reserve Police Force (CRPF).