A team of CTD police on an intelligence report about presence of terrorists, conducted raid in Ahsanabad area of Gadap Town, police sources said.
The terrorists hurled grenades at the law enforcement personnel. The CTD personnel in retaliatory actiion killed two terrorists identified as Hammad and Rehan. A suspect Abu Huraira was arrested after encounter.
Three accomplices of the accused escaped from the scene.
CTD personnel captured over 100 kilogrammes of explosive material, hand grenades, a motorbike and sophisticated weapons, officials said.
The slain and arrested terrorist were members of banned al-Qaida in Subcontinent militant group.
The terroists were involved in attacks on Rangers, police personnel and police stations, officials said.
A bomb making factory was also captured, which was used for planting explosives in motorbikes for terrorist attacks.