Hissing noise coming from the Fill Valve

I heard hissing sound coming from inside of my toilet tank. I lifted the tank cover and noticed that the noise was coming from the top of the fill valve. I carefully removed the top (the cap) of the fill valve and saw that a small amount of water was squirting out. Does this mean that the fill valve needs to be replaced?

Depends on which fill valve you have.
If it's the old style you can replace only the diapragm cap see this thread.
https://terrylove.com/forums/showthread.php?t=14054
if it's the new style that has the white adjustment screw on top, you would have to replace the entire valve.

It could just be doing its job...if the flapper valve is leaking, the fill valve could be open to keep the water level up. Probably dirt in the valve seal, though.