The encounter took place in Nari Baba area of Tirah Valley.
Three security personnel were also injured in shootout with terrorists. The personnel were taken to a hospital for treatment.
Additional contingent of forces was called to the site to control the situation.
The operation in Tirah, part of Khyber tribal area, aims to build on the army’s offensive against strongholds of Tehreek-e-Taliban Pakistan (TTP) and other militant groups in nearby North Waziristan that began in June last year.
Tirah’s geography makes it an almost perfect hideout. Rather than a single valley, it is a network of peaks and vales covering an area of 1500-1800 square kilometres (600-700 square miles) at altitudes of up to 2,500 metres (8,000 feet).
The valleys are steep-sided and covered to a large extent with dense woodland. There are no roads in the area, with locals largely relying on mules and horses for transport.
Tirah also has some of Pakistan’s most fertile land for marijuana and opium, which has helped militant groups fund their activities.