Opposition sources in Iran say that at least four protesters have been shot dead in violent clashes between anti-government crowds and police.
They said security forces opened fire on protesters as some of the fiercest clashes in months erupted in the capital, Tehran. The police have denied there had been any fatalities. Opposition parties had urged people to take to the streets as the Shia Muslim festival of Ashura reached a climax.
People were chanting "Khamenei will be toppled", opposition sources said, a reference to Iran's Supreme Leader. Thousands of demonstrators are reported to have taken part in the protests, in defiance of official warnings.
Seyed Mousavi was shot in the heart at Enghelab Square, the BBC has confirmed. Mr Mousavi was at the hospital where he was taken. Although there were deaths in the immediate aftermath of the disputed elections and protests in June, fatalities since then have been rare. The security forces clearly have to tread a fine line between not appearing weak but also not provoking opposition protesters, says Siavash Ardalan of BBC Persian TV.
Police helicopters were seen flying over central Tehran as clouds of black smoke billowed into the sky, reports said. On the ground, the security forces clashed with protesters trying to reach central Enghelab Square, witnesses said. Protesters were chanting, "This is the month of blood", and calling for the downfall of Iran's Supreme Leader Ayatollah Ali Khamenei, according to opposition websites.
At the same time, crowds of pro-government demonstrators marched on Enghelab Street to voice support for Ayatollah Khamenei, witnesses said.
Protests were also reported in the cities of Isfahan and Najafabad.
Tensions have risen in Iran since influential dissident cleric Grand Ayatollah Hoseyn Ali Montazeri died a week ago aged 87.
Supporters of opposition leader Mir Hossein Mousavi have sought to use Shia religious festivals this weekend to show continued defiance of President Mahmoud Ahmadinejad's government. Denied the right to protest, the opposition chose the highly significant festival of Ashura when millions of Iranians traditionally go onto the streets for ceremonies and parades, BBC Tehran correspondent Jon Leyne says.
The festival mourns the 7th Century death of Imam Hussein, a grandson of the Prophet Muhammad.
Iranian television had live coverage of the Ashura ceremonies, including those in Tehran attended by President Ahmadinejad. Mr Mousavi came second in the June election, and anger at the result saw mass protests in Tehran and other cities that led to thousands of arrests and some deaths. Mr Mousavi has said the poll, that returned Mr Ahmadinejad to power, was fraudulent.