"Law enforcement officers stopped a car, two suspects resisted arrest and were liquidated on the spot. Explosives were found in the car," TASS state news agency quoted a source as saying.
The special operation is reportedly taking place in a residential area of Nizhny Novgorod, an industrial city on the banks of the Volga River, around 400 kilometres (250 miles) east of Moscow.
A law enforcement source told RIA Novosti: "They have shot dead two (people) suspected of terrorism. They were driving in a Daewoo Nexia car. Now FSB (security force) officers are working at the scene."
A law enforcement source quoted by TASS named those killed as "members of illegal armed groups," a term also used by officials to describe Islamist insurgents in the North Caucasus.
There was no immediate official confirmation of the reports.
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