Separatist guerrillas shot at CISF troopers near Naaz cinema building in Srinagar city in the morning.
"One of the injured CISF troopers died while being shifted to the hospital and the other has been admitted to hospital with critical bullet injuries," a senior police officer told IANS.
Panic gripped the area with shopkeepers and pedestrians running helter skelter after the firing incident.
Senior police and paramilitary officials reached the spot.
The CISF troopers were reportedly buying vegetables outside the Naaz cinema building situated less than a kilometer from city centre Lal Chowk when the attack took place.
With the outbreak of separatist violence in Kashmir, Naaz cinema shut its operations in the beginning of 1990.