Military spokesman Brigadier Ruwan Wanigasooriya said the army had been called in on Thursday night to assist the police when a mob threw petrol bombs and tried to attack a police station near the capital Colombo.
Locals in the village of Weliweriya, some 20 kilometres (12 miles) northeast of Colombo, had been protesting against a rubber-glove making plant that they say has polluted their ground water supply.
Police said one man was killed and 37 others were wounded in the night-time clashes in Weliweriya while the military said nine of their troops also received injuries from petrol bombs.
"There is an investigation under way and let that decide if the army opened fire or not," Wanigasooriya said when asked if troops had fired live ammunition at the protesters.
A local resident, speaking on condition of anonymity, said a large number of troops could be seen patrolling the area on Friday morning while intermittent gunfire could also be heard.
"Troops are roaming the area on motor