Backers and opponents of federalism clashed in the eastern Libyan city of Benghazi on Friday with guns, rocks and knives, amid conflicting reports on casualties.

"One person was killed and at least five others were wounded," doctor Basma Mohammed of the Benghazi Medical Center told AFP.

But a city medical official said the fatality was actually from a traffic accident.

"A person who died in a car accident was brought to the medical center, which lead to some confusion, but no one was killed in the clashes."

That was corroborated by the chairman of the Supreme Security Committee of Benghazi, Fawzi Wanis, who said there had been no fatalities, only that two people had suffered gunshot wounds and three others had been knifed or stoned.

He added that "matters were brought under control and the clashes between the two sides are over."

The violence erupted after hundreds of people demonstrated in favour of federalism, a political project that calls for the division of the country into three self-governed regions, an AFP journalist at the scene said.

After Friday prayers, the marchers went to Freedom Square, where Ahmed Zubair Senussi, who is calling for autonomy in the oil-rich east of the country, delivered a speech.

Stones and gunfire were exchanged in clashes between those who favour a federal system of governance and those who, like the ruling National Transitional Council (NTC), reject the idea.

The interim authorities urged people to keep calm.

"We call on everyone to stay calm," said spokesman Mukhtar Al-Jadal, adding that the violence was a spontaneous act that did not reflect in any way the government's position on the controversial issue.

Interim authorities have equated the call for federalism to sedition.

A week ago, demonstrators flooded the streets of Tripoli and Benghazi in protest against federalism, and one person was killed when a market was set ablaze.

That came after a conference in Benghazi of tribal and political leaders unilaterally declared Cyrenaica, or Berqa in Arabic, to be autonomous, prompting fears the country might split up.

Libya was a federal union from 1951 to 1963 during the monarchy of Idris Senussi, which divided the country into three administrative regions -- Cyrenaica in the east, Tripolitania in the west and Fezzan in the south.

Senussi dissolved the federal system in 1963. Since then, Libya has been centrally governed and residents in the southern and eastern regions complain of marginalisation.

Thousands of people converged last week at the seaside courthouse of Benghazi last Friday chanting slogans against federalism and Senussi.

In Tripoli, thousands of people amassed in the symbolic Martyrs Square, singing "No, no to federalism" and "Libya is one."

A huge fire, thought to be the work of arsonists, ripped through a Benghazi furniture market and other blazes erupted in shops across the coastal city, an AFP correspondent reported at the time.

A conference hall where advocates of federalism were expected to meet was also targeted, witnesses said.