One person was killed and 17 wounded when Indonesian soldiers opened fire on civilians after a deadly dispute sparked by a road accident in Papua province, police said Thursday.

The shootings took place late Wednesday after residents, angry that two soldiers on a motorcycle hit and injured a child, stabbed one of the troops to death and seriously injured the other in the city of Wamena, police said.

"Following the road accident soldiers from the local military arrived in two trucks and took revenge by firing gunshots toward local residents and setting a number of houses on fire," national police spokesman Saud Usman Nasution said.

"The trouble then spread to the city centre where a number of shops and houses were also damaged by gunshots," he told AFP.

Jhon Wetipo, in charge of the Jayawijaya district of which Wamena is the capital, said the soldiers shot one man dead and wounded 17 people, one of them critically.

He said troops set 37 homes on fire, but that calm had been restored by Thursday morning.

The provincial military spokesman denied that there had been a shooting or that troops had set fire to homes but residents contacted by AFP supported the police version of events.

Indonesian security forces are widely accused of abusing the basic rights of indigenous Melanesians in Papua, where a low-level insurgency has simmered for decades.

In 1969, Indonesia took control of Papua, a former Dutch colony on the western half of New Guinea island, after a vote among a select group of Papuans widely seen as a sham.