Police say civilian was killed by a stray live round in Arwani village during protests that followed a gun battle.
A 42-hour gun battle that started on Thursday has ended in Indian-administered Kashmir after two suspected rebels and one civilian were killed, triggering massive anti-India protests in the disputed region.
A police officer said soldiers recovered bodies of the two suspected rebel fighters from the debris of a destroyed house in southern Arwani village on Friday.
The gun fight started on Thursday after Indian soldiers and police cordoned off the southern Arwani village, and gunmen hiding there opened fire in an attempt to break through the siege.
As the shooting raged, thousands of people from neighbouring villages ignored government orders to stay away and marched to Arwani.
At least one civilian was killed and dozens of others were wounded during the protests. A police statement said the man died after being hit by a stray bullet. One injured civilian was in critical condition.
The bodies of the suspected rebels were were charred beyond recognition, and authorities were conducting DNA tests to determine their identities, according to a police officer.
Massive protests against Indian rule erupted in Arwani and neighbouring villages on Friday as thousands of Kashmiris chanted pro-rebel and pro-freedom slogans.
Mobile and internet services in some areas of southern Kashmir remained suspended for a second day as authorities sought to stop activists from mobilising anti-India protesters.
Kashmir is experiencing its largest protests against Indian rule in recent years. At least 90 civilians and two policemen have been killed and thousands injured in the protests.
Hundreds of the injured have been blinded and maimed, mostly by government forces firing bullets and shotgun pellets at rock-throwing protesters.
Curfews, communication blackouts, crackdowns and strikes have largely paralysed daily life.
India and Pakistan each administer a portion of Kashmir, but both claim the Himalayan territory in its entirety.
Rebel groups have been fighting since 1989 for either independence or a merger with Pakistan. Since then, more than 68,000 people have been killed in the uprising and ensuing Indian military crackdown.