Riots broke out in a northern Nigerian town on Wednesday after soldiers were accused of shooting a protester, with churches and the traditional leader's palace set alight, residents said.

The riot in the town of Biu followed a protest over the arrest of several teachers from an Islamic school on suspicion of belonging to an Islamist sect that has been blamed for scores of attacks, residents said.

"The soldiers then began shooting into the air to disperse the protesters outside the palace," said one of the residents, Babagana Ali. "A bullet hit a woman in the head. She died instantly, but her two-year-old baby survived."

Another woman was shot in the shoulder and taken to hospital, he said. According to Ali, the protesters numbered around 1,500.

Protesters further angered over the shooting set part of the emir's palace ablaze and burnt two nearby churches, he said. Part of a local government building also burned.

One of those arrested, Abubakar Ibrahim Musa, said a total of seven teachers were detained by soldiers on Wednesday morning.

"We were told at the barracks that we were arrested because some of us were suspected of belonging to Boko Haram sect," he said by phone.

"They said it was not expedient to pick the suspects from among us at the school but to bring all of us along and sift the suspects and release those of us not on the list."

Three of the teachers, including Musa, were later released and brought to the emir's palace to "douse tension," he said, while the other four remained in custody.

A military spokesman in Maiduguri, some 200 kilometres (120 miles) north of Biu, said he received "information from Biu that a woman was shot and killed during a protest which led to rioting by residents in which the palace of the emir was affected."

The spokesman, Lieutenant Colonel Hassan Mohammed, however said the town was outside his jurisdiction and referred further questions to his counterparts in the Biu area. A military spokesman there declined comment.

The country's northeast has been hit by scores of attacks blamed on the Islamist sect known as Boko Haram. Most of the attacks have occurred in Maiduguri, but a number have also taken place in Biu.

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