Wani was arrested late Thursday based on intercepts of a phone conversation between him and another person identified as Ghulam Ahmad Dar, a police official said.
"The middle rung Hurriyat leader was arrested after his phone conversation with Ghulam Ahmad Dar during which Wani had told his friend that 10-15 people should be martyred during protests with security forces," he said.
Wani and Dar had been discussing a violent protest in central Badgam district, he added.
The arrest followed disclosures by home ministry sources in New Delhi that "some violence in Kashmir was instigated".
Wani's family has, however, been maintaining that he is innocent.
Many parts of the valley have been under an indefinite curfew, enforced with the army's assistance, following violent protests that led to three deaths in firing by security forces Tuesday.
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