The antiterrorism operation was conducted in Leninkent, some 10 kilometers (6 miles) from the republic's capital of Makhachkala, in an effort to trace gunmen believed to be involved in terrorist attacks and attempts to kill Russian security officers.
Interior Ministry and FSB forces converged on the village around 6 a.m. (03:00 GMT) and by about 8:30 a.m. they had surrounded two private houses near a school. Militants later opened gunfire injuring two officers.
Three gunmen were killed in the operation, including Omar Sheikhulayev, known as the "Emir of Daghestan." Sheikhulayev, who was on the international wanted list, is believed to have been among the terrorists who seized a school in the North Caucasus town of Beslan in 2004.
The Shariat Jamaat group has been involved in numerous attacks on the local and federal security forces in Russia's North Caucasus. The group claimed responsibility for the murder of a senior officer with Russia's Interior Ministry, Maj. Gen Valery Lipinsky, in Makhachkala on December 28.