As the police personnel neared the forest, they were fired upon, after which they fired back. Assistant Sub-Inspector Amitabh Mallik was hit in the gunfire while two policemen were injured. Police say some of Mr Gurung's men have been injured too.
"We mourn the death of our brave heart," senior police officer Anuj Sharma told reporters.
Police found 6 AK-47 assault rifles, a 9 millimetre pistol and 500 rounds of ammunition at the place where the gunfight took place.
The police launched operations to find Mr Gurung after he sent out an audio message yesterday, saying he would return to Darjeeling on October 30 and asked people to turn out in large numbers to meet him.
Mr Gurung's group has now fled towards neighbouring Sikkim, Mr Sharma said. They also set a police vehicle on fire. "Darjeeling is peaceful, but some people want to create trouble," Mr Sharma said.
The move can be construed as a major blow to Gorkha Janmukti Morcha chief Bimal Gurung who has been spearheading the agitation for a separate Gorkhaland state for over three months.
Today, Gorkha Janmukti Morcha leader Binay Tamang, who has been appointed Darjeeling boss by Mamata Banerjee by sidelining Mr Gurung, arrived in Kolkata for talks with the chief minister today.
Referring the gunfight between police and Mr Gurung's men today, Mr Tamang said, "Now that AK-47s and other arms have been found, I urge Darjeeling's people not to allow Darjeeling to turned into another Kashmir or a terrorist district."
Mr Tamang will meet Ms Banerjee at 5 pm today. On Sunday, he is scheduled to meet the Governor and on Monday, the chief minister will hold formal talks on the way forward in Darjeeling.