The bloodshed kicked off three days of nationwide protests against the government of the poor Central American country, including a general strike on Friday and a car caravan through flashpoint areas of the capital Managua on Saturday.
The fatalities occurred in the southeast town of Morrito as marching protesters, some of them armed, came under attack from police and paramilitaries and responded with gunfire, said Francisca Ramirez, head of an opposition grouping called the Civic Alliance for Justice and Democracy.
Police confirmed the death toll but blamed the violence on "terrorist groups" that pretended to be carrying out a peaceful march and opened fire on a police station.
Protesters also abducted nine police officers and attacked the Morrito town hall, the police said in a statement.
Morrito is a town of 6,000 that is home to many farmers who own guns to protect their land.