The February 14 movement said on Facebook that Hussein Abdullah, one of its local leaders, had been "martyred in a terrorist attack carried out by the intelligence services".
His death triggered anger on the streets of the Sunni-ruled, Shiite-majority Gulf state, with the group saying its supporters set alight tyres and blocked several streets in protest.
Police said, in a statement carried by the official BNA news agency, that Abdullah died after suffering severe burns when a bomb he had been making exploded on the roof of his house.
Abdullah's family denied he had been killed in a bomb blast.
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He had "died while working at a small workshop on the roof of the house," it said in a statement, denying he was making a bomb or that there were any explosives in the residence.
Bahrain, a Gulf kingdom ruled by the Sunni Al-Khalifa dynasty, was shaken in February 2011 by a protest movement led by the Shiite majority.
The security forces crushed the month of protests, but demonstrations still continue to take place regularly in Shiite villages around the capital.