A fresh gunbattle erupted Sunday at the Indian air force base attacked by suspected Islamic militants a day earlier with the loss of 11 lives, police said.

Officers said they believe up to two gunmen were still hiding inside the base.

Seven soldiers including a senior officer and four attackers have so far been confirmed killed during the raid on the Pathankot base in the northern state of Punjab, near the border with Pakistan.

The assault -- a rare targeting of an Indian military installation outside disputed Kashmir -- threatens to undermine improving relations with Pakistan.

It came just about a week after Indian Prime Minister Narendra Modi paid a surprise visit to Pakistan, the first by an Indian premier in 11 years.

"We suspect one or two terrorists are hiding inside. They are firing intermittently," Pathankot police chief Kunwar Vijay Partap Singh told AFP.

An AFP reporter near the site also confirmed gunfire from inside the base.

Local media reports said one of the militants was killed in a counter-assault. There was no immediate confirmation.

The Pathankot air base houses dozens of jet fighters and is important for its strategic location about 50 kilometres (30 miles) from the Pakistan border.

A police official, who asked not to be named, told AFP that in the latest clash soldiers came under fire as they were clearing explosives from the site.

Loud explosions were also heard at the heavily guarded air base in the early hours of Sunday, but it was unclear if the blasts were part of the fresh battle or controlled explosions.

Security officials suspect the gunmen belong to the Pakistan-based Jaish-e-Mohammed Islamist group. It carried out the 2001 attack on the Indian parliament which brought the two countries to the brink of war.

Fighting lasted 14 hours after the initial pre-dawn attack Saturday by the militants. Police had said Saturday evening that no attackers were still at large.

Among the military dead was a lieutenant-colonel in the elite National Security Guard, a commando unit. Also killed was Subedar Fateh Singh, a gold medallist at the 1995 Commonwealth Shooting Championships in New Delhi, an air force spokeswoman said.

In July three gunmen said to be Pakistan-based Lashkar-e-Taiba militants killed seven people including four policemen in an attack in the Sikh-majority state of Punjab.

The possible involvement of Pakistan-based militants in the latest raid could be a setback for peace overtures between the nuclear-armed rivals, who have fought three wars since independence in 1947.

Indian Prime Minister Narendra Modi Saturday termed the attackers as "enemies of humanity" but did not blame Pakistan.

Pakistan moved quickly to condemn the attack, describing it as a "terrorist incident".

The US State Department termed the assault "a heinous" terrorist attack and urged the two rivals to work together to hunt down those responsible.

Modi's December 25 visit to the Pakistani city of Lahore to meet his counterpart Nawaz Sharif indicated a potential thaw in tensions, and the foreign secretaries of both countries are scheduled to meet in Islamabad this month.

Authorities had put Punjab on high alert Friday after five gunmen in army fatigues hijacked a car driven by a senior police officer. It was later found abandoned on a highway connecting Pathankot to Kashmir.

It was unclear if there was a link to Saturday's attack.

Gunmen attack Indian air force base near Pakistan border
Pathankot, India (AFP) Jan 2, 2016 - Suspected Islamist gunmen staged a pre-dawn attack on a key Indian air base near the Pakistan border Saturday with at least two militants killed in a shootout, officials said, striking a blow to the neighbours' fragile peace process.

At least four gunmen suspected to be from the Pakistan-based Jaish-e-Mohammed Islamist group dressed in army uniforms infiltrated Pathankot air base in northern Punjab state at around 3:30 am (2200 GMT).

An operation to secure the base was still ongoing 12 hours after the attack -- a rare targeting of an Indian military installation outside disputed Kashmir -- as special commandos combed buildings looking for militants still hiding out.

It comes a week after Prime Minister Narendra Modi paid a surprise visit to Pakistan, the first by an Indian premier in 11 years, and threatens to derail talks between the nuclear-armed rivals, who have fought three wars since independence in 1947.

"We want peace but if terrorists carry out attacks on Indian soil we will give them a befitting reply," Home Minister Rajnath Singh said in televised remarks.

A protest broke out on the road leading to Pathankot base in the early afternoon Saturday as angry residents burned effigies apparently intended to resemble Pakistani militants, an AFP journalist at the scene said.

"At least two of the attackers are dead," regional police chief Kunwar Vijay Partap Singh said, adding that six to seven security officers were injured, some critically.

Pakistan moved to condemn the attack Saturday afternoon, describing it as a "terrorist incident".

"Building on the goodwill created during the recent high level contacts between the two countries, Pakistan remains committed to partner with India... to completely eradicate the menace of terrorism afflicting our region," Islamabad's foreign ministry spokesman said.

- Strategic base -

The Pathankot air base houses dozens of fighter jets and is important for its strategic location about 50 kilometres (30 miles) from the Pakistan border.

Local television stations showed helicopters surveying the area, while elite National Security Guard commandos were flown in to flush out the attackers.

"We believe they are Jaish-e-Mohammed terrorists," a top security official at the scene told AFP, speaking on condition of anonymity.

Jaish-e-Mohammed, which is banned in Pakistan, fights against Indian rule in the divided Himalayan region of Kashmir, where a separatist conflict has claimed up to 100,000 lives.

While Punjab has largely been spared such violence, however, it has not been immune.

In July, three gunmen said to be Pakistan-based Lashkar-e-Taiba militants killed seven people, including four policemen, in an attack in the majority-Sikh state.

Modi's December 25 visit to Lahore to meet his Pakistani counterpart Nawaz Sharif indicated a potential thaw in tensions between the historical foes, and the foreign secretaries of both countries are to meet in Islamabad this month.

But his friendly outreach prompted critics to warn of retaliation by militants.

"Our prime minister visited and after that the terrorists came here. They want friendship with Pakistan but look what they are doing to us," said Ashok Kumar, 52, a shopkeeper in Pathankot.