Indian sources claim a fisherman from the hamlet of Pushpavanam in the southern Indian state of Tamil Nadu was fishing with two friends on the weekend about 11 nautical miles off the coast.
India's External Affairs Minister S. M. Krishna said the alleged shooting by the Sri Lankan navy was "unacceptable."
Indian Finance Minister Pranab Mukherjee, visiting the Tamil Nadu state capital Chennai, said he hoped there would be no more shootings of Indian fishermen.
"I am told that in the last 10 days two fishermen (from Tamil Nadu) have been killed. We have good relations with Sri Lanka and are helping them," Mukherjee said. "There is no point in shooting."
Mukherjee said if Indian fishermen stray across an international maritime boundary, they should be arrested but also be subject to due processes of law.
But the Sri Lankan navy said they had no details of any shootings.
"Our patrol crafts operating off the northern coast have nothing to do with this reported incident," Sri Lankan navy spokesman Capt. Athula Senarath said. "There may be some elements involved in trying to tarnish the good relations we have (with India)."
The latest incident follows the death Jan. 12 of an Indian fisherman when the Sri Lankan navy reportedly opened fire on a small vessel.
India reacted strongly again, saying there was no "justification" and asked Sri Lankan authorities in the island nation to "desist" from using force.
Prasad Kariyawasam, Sri Lanka's high commissioner in New Delhi, denied any government involvement in Saturday's shooting. "Our enquiries reveal that the Sri Lankan navy is not involved," he said.
"The (Sri Lankan) navy is under strict orders never to fire at fishermen, even if they cross international boundary lines toward Sri Lanka."
Confrontations between Indians and local fishermen from Tamil Nadu were frequent in the past when a civil war was raging in Sri Lanka.
The Liberation Tigers of Tamil Eelam, also called the Tamil Tigers, and other extremist groups fought the central Sri Lankan government for an independent Tamil state called Tamil Eelam in the north and the east of the island. But after 26 years and between 80,000 and 100,000 people killed, according to U.N. statistics, the Sri Lankan military defeated the Tamil Tigers in May 2009.
One of the Sri Lankan government's offensive strategies was having a strong naval presence in the Indian ocean, across from India's Tamil Nadu state in an effort to thwart ethnic Tamils from using India as a base. It also stopped India's Tamils from going to the aid of Sri Lankan Tamils.
With the civil war ended and the rebels defeated, many Indian politicians and ethnic groups in India believe Sri Lanka should scale down its naval presence off the coast of India to avoid incidents, fatal or otherwise, with hapless local Indian fishermen.
India has vowed to support the rebuilding of Sri L4anka as a single state but relations remain sensitive. During Sri Lanka's civil war, India at times gave aid and material support to Tamil Tiger groups on the island, especially when the mostly ethnic Tamil city of Jaffna in the north was under siege by the Sri Lankan army.
India was careful not to upset its own Tamil population in Tamil Nadu, some of whom want an independent state.