Angry protesters occupied a governor's office in south-eastern Iran on Tuesday, a day after at least two fuel smugglers were shot dead at the nearby border with Pakistan.
Iran has long fought rampant smuggling to neighbouring countries. One of the hot spots is its impoverished Sistan-Baluchestan province, which is often the scene of clashes between security forces and separatist militants and drug smugglers.
Iranian officials in the past tolerated limited smuggling as a source of income for locals plagued by high unemployment, but tightened controls recently, a resident told Reuters.
State TV quoted deputy provincial governor Hadi Marashi as saying two people were killed by gunfire on the Pakistani side of the border.
But Pakistani border officials said protests broke out on Monday on Iran's side of the frontier after troops fired at people involved in the illegal Iranian fuel trade.
Abdul Razaq Saloli, deputy commissioner of the border district of Panjgur, said a body and an injured Pakistani were handed over to border authorities by Iranian officials.
Mr Saloli said the injured Pakistani man, identified as Shams Baloch, had reported that more than 10 people were killed and many injured in the shooting.
Protesters stormed the governor's office on Tuesday and set fire to a police car, social media videos showed.
Security troops used tear gas to disperse the crowd.
Reuters could not verify the authenticity of the footage.
Sana Ullah Baloch, a member of the provincial assembly in the neighbouring Pakistani region, said on Twitter that 12 Baluchi youths were killed.
Mr Baloch urged Iran to investigate the incident and punish those found guilty.