The UN peacekeeping mission in Lebanon (UNIFIL) said the man died when a projectile exploded at one of its positions near the southern village of Adchit al-Qusayr on Sunday.
Indonesia's foreign ministry condemned the incident and demanded "a thorough and transparent investigation".
Three others were injured by indirect artillery fire in the vicinity of the Indonesian UNIFIL contingent's position near Adchit al-Qusayr, it said in a post on X.
"We do not know the origin of the projectile," UNIFIL said.
"We have launched an investigation to determine all of the circumstances."
UN Secretary-General Antonio Guterres strongly condemned the incident, saying attacks on peacekeepers were grave violations of international humanitarian law and could amount to war crimes.
He called for accountability and urged all parties to ensure the safety of UN personnel.
UNIFIL is stationed in southern Lebanon to monitor hostilities along the demarcation line with Israel - an area that is at the heart of clashes between Israeli troops and Iran-backed Hezbollah fighters.
The mission, which will be halted at the end of 2026, has been sporadically caught in the crosshairs of both Israel and Hezbollah in the past couple of years.
On March 6, Ghana's armed forces said the headquarters of its UN peacekeeping battalion in Lebanon was hit by missile attacks, leaving two soldiers critically injured.
Israel's military later acknowledged its tank fire had hit a UN position in southern Lebanon that day, wounding the Ghanaian peacekeepers.
The military said its troops had responded to anti-tank missile fire from Hezbollah, which had moderately wounded two of its soldiers.
UNIFIL said it had launched an investigation to determine all of the circumstances.
"Once again, we call on all actors to uphold their obligations under international law and to ensure the safety and security of UN personnel and property at all times, including by refraining from actions that may put peacekeepers in danger," UNIFIL said.
Indonesia condemned the incident and said any harm to peacekeepers was unacceptable, while reiterating its condemnation "of Israel's attacks in Southern Lebanon".
Lebanon was pulled into the war in the Middle East when Hezbollah fired rockets at Israel on March 2 in solidarity with Tehran, two days after Iran was attacked by Israel and the US.
Hezbollah's attack prompted a new Israeli offensive against the group.
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