The version of I Am Legend which I watched ended with Will Smith alive, but my friend claims that he had watched the same movie, in which he was killed by the zombies.
I have gone through a similar question to mine, but in that question they are talking about the ending of the book while my friend is sure that he had watched the movie where Will Smith dies. Is it true?
You saw the alternate ending, then. As for your friend, he is slightly mistaken. Will Smith actually blew himself up in the theatrical release.
On the Wiki page, you can check out the Alternate Ending and Home Media sections to see where it's available. Also, this IMDB page details the differences. With specific reference to your question:
The ending to the Alternate Theatrical Version varies from the original ending. Instead of blowing himself and the hemocytes up with a grenade, Neville discovers that the hemocytes actually came for the female he captured earlier in the movie. He relieves her of the cure and returns her to the hemocytes. Afterwards, the hemocytes leave and let Neville, Anna, and Ethan be. The three then are seen leaving New York heading to Vermont's safe zone with Anna broadcasting a message telling all other survivors that she is with Neville and is heading to the safe zone.
