Key separatists Syed Ali Gilani and Mirwaiz Umar Farooq were put under house arrest after Gilani called upon residents of to march to a football ground in the state’s summer capital Srinagar for a rally.
Authorities responded by enforcing a strict curfew in most of Srinagar and imposed strict security restrictions in other towns.
Barbed wire barriers and iron gates were erected to seal off the area around the grounds, which lie close to a small UN office.
"The step has been taken to prevent any law and order problems," police official Pervez Ahmed told AFP.
The Kashmir government rarely allows separatists to hold rallies, but residents over the past 11 weeks have been holding almost daily anti-India protests, often defying curfews.
The scenic region has been under rolling curfews to contain deadly protests that began with the killing of a teenage student in Srinagar by a police teargas shell on June 11.
Since then a total of 64 protesters and bystanders have been killed, mostly by security forces who have opened fire on stone-pelting protesters.
Indian Prime Minister Manmohan Singh in a speech in New Delhi earlier in the week urged "non-lethal, yet effective and more focused, measures" to be used in Kashmir to restore order.
This prompted a major police shakeup with the transfer of the police chief for the Kashmir valley, which has been at the centre of protests, and his replacement by a senior officer from New Delhi who previously served in the region.
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