The incident took place at Murabari in West Tripura district, about 30 km from here.
The three hawkers, all from outside the state, had come to Murabari around 9:30 am. They had come for trade purposes, Assistant Inspector General (AIG) of Police Smriti Ranjan Das said.
They had hired a vehicle from Bitterban, an urban slum here, and when they reached the area, people suspecting them to be child lifters started beating them up, the AIG said.
"The hawkers along with their driver sought refuge in a Tripura State Rifles (TSR) camp in the area. However, nearly a thousand agitated people chased them and entered the camp, and lynched one of the hawkers," Das said.
TSR jawans fired two rounds in the air and four tear gas shells to disperse the mob, he said.
One of the hawkers died and four people -- the other two hawkers, the hired car's driver and a police constable -- were injured in the incident, Das said. The injured police constable was identified as Sumit Sanyal.
The person killed in the incident was a resident of Uttar Pradesh, police said.
The two other hawkers, from Uttar Pradesh and Bihar, and the car's driver have been admitted to the G B Pant Hospital, they said.
Inspector General of Police (Law and Order) K V Sreejesh, DIG Arindam Nath and other officials visited the spot.
Following the incident, Tripura Director General of Police A K Shukla issued a notification stating that SMS of all mobile phone service providers and internet data services have been suspended in the district for the next 48 hours to prevent rumour mongering.
"It has been noticed that SMS, WhatsApp and social media platforms such as Facebook, Twitter and YouTube are being widely used for transmission of fake images and videos as well as text messages which have potential to incite violence in the state at a larger rate," the DGP said in the notification.