JKLF chairman Mohammad Yasin Malik was arrested on Saturday in Kokernag area of south Kashmir's Anantnag district by the Jammu and Kashmir police and later released in Srinagar.
No group has yet claimed responsibility for the attack.
Frontline militant group Hizbul Mujahideen has claimed responsibility for the explosion.
"As the troops moved in, they came under heavy fire from the militants hiding in a house. Reinforcements were immediately rushed to the area and the house was surrounded," a senior police officer said in Srinagar.
Curfew in many parts and separatist-sponsored strike disrupted normal life for the 30th straight day on Sunday in Kashmir Valley where violence has so far left 54 persons dead and more than 6000 others injured.
Four persons were killed while scores of others were rescued when avalanches struck the Kashmir Valley after unprecedented snowfall.
A yajna was also organised on the occasion. A large number of Kashmiri Pandits had come from Jammu and other migrant camps to pay obeisance at the temple.
Within hours of the incident, police arrested the accused and said he was tasked by terror outfit Hizbul Mujahideen to carry out the attack.
Security agencies braced for a march called by separatists on Monday.
Police, assisted by security forces, immediately sealed the area and a hunt has been launched to nab the militants involved in the killing, the sources said.
Women will have a decisive say as chairpersons in seven of Jammu and Kashmir's 20 districts.
The village head was accidentally shot dead by the Army.
The report, however, said the identification of accused Army personnel from Panchalthan camp was yet to be ascertained.
Since 1990 for the first time, shopkeepers opened their shops in Lal Chowk in Srinagar on Republic Day as there was no strike call in the Kashmir Valley on Thursday.
A soldier shot dead a Junior Commissioned Officer and another jawan following a heated argument at a Rashtriya Rifles camp in Anantnag district of Jammu and Kashmir
The five were killed in two separate encounters in Anantnag and Rajouri districts.
The militants were affiliated with the Harkat-e-Jehad-e-Islami outfit.
Curfew was on Friday extended to several areas of Kashmir to foil a planned march by separatists to Eidgah in old city area as normal life continued to remain paralysed for the 49th consecutive day in the Valley in the wake of violence following the killing of Hizbul Mujahideen militant Burhan Wani last month.
They want to gauge public opinion on the recent Indo-Pakistan peace talks.
General Officer Commanding (GoC) of the Army's Srinagar-based 15 Corps or Chinar Corps, Lt Gen D P Pandey, said there have been some infiltration attempts, but unlike previous years they have not been 'adequately supported' by ceasefire violations.
Sayar Ahmad Sheikh was hit by a tear smoke shell while Yawar Bhat, died in security forces' action after protesters indulged in stone pelting.
Yousuf Malik, a resident of Check Rambirpora village in Anantnag district, had received the bullet injury in his left leg during an encounter with security forces in Kulgam early on Thursday.
As news started pouring in about the plight of the stranded tourists, the administration swung into action and started free boarding and lodge for the tourists.
The death toll in the unrest in Kashmir rose to 44.
As many as 160 terrorists were killed and 102 arrested in Jammu and Kashmir in 2019.
At a time 20-odd opposition parties, many of them regional rivals, joined forces over the Adani issue, Nationalist Congress Party supremo Sharad Pawar's open support for industrialist Gautam Adani has put a question mark on the durability of a non-Bharatiya Janata Party block in the run-up to the 2024 parliamentary elections.
Jammu and Kashmir Agriculture Minister Abdul Aziz Zargar said such allegations are being made despite the police denying any links between him and the militants.