A 22-year-old man was also killed when security forces allegedly fired upon stone-pelting protesters in the native village of the slain militant in Kulgam district.
The body of the militant, identified as Farhan Ahmad Wani, was handed over to his parents for burial in Khudwani village on the border of Kulgam and Shopian where villagers were already agitating over the death of a person killed in a road accident involving a para-military vehicle.
Wani's death agitated the crowd further and it started pelting stones at a nearby Army camp, officials said.
They said that the Army started firing in the air initially but had to aim at the crowd when jawans claimed to have been fired upon from the other side, the officials said.
Two persons received bullet injuries with one of them succumbing to his wounds in the hospital, they said.
The deceased has been identified as 22-year-old Khalid Dar. The other injured man named Yasir, 30, was said to be in a stable condition in the hospital.
Giving details of the encounter, officials said that there was an intelligence input that militants from Hizbul Mujahideen and Lashker-e-Taiba had gathered in Pehlipora village in Larnoo, Kokernag.
One militant was killed while five others were believed to have escaped, the officials said.
Earlier, the police and the Army had claimed to have killed two militants in the encounter.
The police spokesperson said that the police along with the Army and the CRPF cordoned the area and launched a search operation in Pehlipora village after getting information about the presence of militants there.
"During the searches, terrorists hiding in the area fired upon the joint search team. The fire was retaliated," he said.
"One terrorist was killed in the encounter, who was identified as Farhan Ahmad Wani, a resident of Redwani- Khudwani in Kulgam district," he said.
The spokesperson said one INSAS rifle, two magazines and 42 rounds were recovered from the encounter site.
Wani was a "hardcore stone pelter" and an FIR was registered against him under different sections of the Jammu and Kashmir State Ranbir Penal Code.
He was also involved in many anti-national and unlawful activities, the spokesperson said.
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