Government forces in India-held Kashmir said they had killed a top commander from a 'militant group' after a fierce gunfight in the disputed region on Saturday that sparked violent protests.

The gunfight is the latest in a string of deadly shootouts between Indian forces and rebels during an upsurge in violence in restive India-held Kashmir.

The suspected rebel commander, named as Waseem Shah and alleged to be a member of Lashkar-e-Taiba (LeT), was killed after Indian soldiers and special police forces acting on a tip off surrounded the southern village of Litter.

“In the ensuing gun battle the LeT commander and his bodyguard were killed,” an Indian police officer told AFP, speaking on condition of anonymity.

Hundreds of local people took to the streets as news of the deaths spread, with some protesters pelting government forces with stones and shouting slogans for Kashmir's independence from Indian rule.

Security forces responded with gunfire that left one dead.

“One man died on way to hospital after he was hit with a bullet,” another police officer said, adding that at least 15 others were wounded during the clashes.

Rebels groups have been fighting for decades against Indian soldiers deployed in the territory. The fighting has left tens of thousands, mostly civilians, dead.

LeT has been blamed for being behind bloodshed in India, most notably the Mumbai attacks in November 2008 when heavily armed gunmen battled commandos on the streets of the financial capital, killing 166 people.

Earlier this year the Indian army launched an offensive dubbed “Operation Allout” to hunt down anti-India militants.

At least 166 militants and 59 security personnel have died so far this year.

India maintains presence of roughly 500,000 soldiers in India-held Kashmir, deployed in villages and towns as well as along the Working Boundary with Pakistan.