Militants stormed the camp early on Saturday and hundreds of police, army and paramilitary soldiers were rushed in to dislodge the fighters, a home ministry official said in the capital, New Delhi.
A senior police officer, who asked not to be identified, said five soldiers and a civilian were killed after militants breached the Sunjuwan army camp in Jammu early on Saturday.
He said three attackers had also been killed. The army camp in the city of Jammu is close to two shopping centres and public schools.
Officials said an unknown number of attackers were cornered inside the residential complex of the camp, where they were locked in a fierce standoff.
India's army chief, Bipin Rawat, reached the Occupied Valley on Sunday morning to review the operation as the gunfire stretched into its second day.