Another 20 people were injured in the shootout which started when police tried to clear the ex-rebels from blocking roads in the city of Bouake.
Three demobilised ex-rebel fighters were killed in Ivory Coast's second-largest city, Bouake, on Tuesday as they clashed with police attempting to end their protest over bonus payments, a policeman and a spokesman for the former fighters said.
The police source said another 20 people were being treated for injuries at the main hospital in Bouake, a city that has been at the centre of unrest this year caused by disgruntled soldiers and former combatants in a 2011 civil war.
Accounts differed concerning what happened when police moved in to clear the group of former fighters, who had been blocking traffic on the main road leading into the city.
Amadou Ouattara, a spokesman for the group, said policemen had fired tear gas before shooting into the crowd of protesters.
Unarmed or grenade?
"They were unarmed," Ouattara said. An officer with the police in Bouake disputed that version, however.
"One of the demobilised combatants had a grenade which exploded accidentally, killing three people at the scene and wounded more than 20," said the officer, who asked not to be named as he was not authorised to speak to the press.
The Ivory Coast has been plagued by protests over pay for much of the year.
The latest deaths follow a mutiny earlier this month, the latest in a series of armed protests which began in January in the West African country, with troops angered by a wage dispute with President Alassane Ouattara's government.
That uprising ended when the government agreed to pay the soldiers bonuses of 12 million CFA francs (18,000 euros) each.
At the time, they were given a partial payment of 5 million francs with the remainder due to be paid this month. But the last payment never materialised, prompting the latest round of unrest in May.
According to sources among the rebel soldiers, the government has now agreed to give them an immediate payment of 5.0 million CFA francs with the remaining 2 million to be paid next month.