Sustained bursts of automatic weapons fire and powerful single shots began at around around 4am local time (2.00GMT) and was ongoing more than an hour.

Pro-democracy protest organiser, Mustafa el-Naggar, who's in Tahrir Square, said the gunfire came from at least three locations in the distance. He said the Egyptian military entered the square with tank squads to try to keep some order, but did not intervene.

An Al Jazeera online producer in Tahrir Square witnessed doctors attending to two gunshot victims, one who was shot in the head. "There was a puddle of blood on the concrete beneath the man ... but he still had a pulse and might survive," our producer said.

The gunfire marks an escalation of tensions, which began on Wednesday when supporters of embattled president Hosni Mubarak charged into Tahrir Square - some on horses and some on camels - clashing with pro-democracy demonstrators gathered there.

Protesters from both sides fought pitched battles in Tahrir Square, the epicentre of ongoing demonstrations against Hosni Mubarak, which entered their tenth day on Thursday.

Pro-Mubarak supporters also threw Molotov cocktails and homemade bombs at opposition protesters, who erected makeshift barricades around the square. Our online producer there visited an ad hoc 'prison' where protesters had captured around six pro-Mubarak supporters.

The Egyptian army reportedly also arrested several people following the violence early on Thursday, however the numbers were unconfirmed.

Hillary Clinton, the US secretary of state, condemned the "shocking" bloody clashes that rocked Cairo, in a call to Vice President Omar Suleiman.

"The secretary urged that the government of Egypt hold accountable those who were responsible for violent acts," the state department said in a statement.

Fresh standoff

Al Jazeera's special coverage of Egypt

An Al Jazeera correspondent, reporting from just outside the square late on Wednesday, said dozens of pro-Mubarak supporters had erected barricades on either side of a road, trapping the pro-democracy supporters. They were gathering stones, breaking streetlights and using balaclavas to cover their faces, apparently in preparation for a fresh standoff with the pro-democracy crowd.

Our correspondent said local residents thought the men preparing for the standoff were police officers but the claim could not be independently confirmed.

Just hours earlier, an Al Jazeera online producer reporting from near Tahrir Square said: "Someone - a few people actually - were dropping homemade bombs into the square from the buildings surrounding it."

The Reuters news agency reported quoting officials that three people were killed in Wednesday's violence. It also quoted a doctor at the scene as saying that more than 1,500 had been injured.

Army standing by

Witnesses said the military allowed thousands of pro-Mubarak supporters, armed with sticks and knives, to enter the square on Wednesday. Opposition groups said Mubarak had sent in "thugs" to suppress anti-government protests.

Though initially put on the back-foot by the sudden attack, determined pro-democracy protesters looked to be winning the battle against the assailants.

The worst of the fighting was just outside the world famous Egyptian Museum, which was targeted by looters last week.

Scare tactics

Many of the pro-Mubarak supporters who gathered on Wednesday raised slogans like "Thirty Years of Stability, Nine Days of Anarchy".

Al Jazeera's Jane Dutton, in Cairo, said that security guards have also been seen amongst the pro-Mubarak supporters, and it may be a precursor to the feared riot police arriving on the scene.

Several cars went up in flames near Liberation Square as riots raged deep into the night [AJ online producer]

Fighting took place around army tanks deployed around the square, with stones bouncing off the armoured vehicles.

Mohamed ElBaradei, a prominent opposition figure, accused Mubarak of resorting to scare tactics.

"I'm extremely concerned, I mean this is yet another symptom, or another indication, of a criminal regime using criminal acts," ElBaradei said.

"My fear is that it will turn into a bloodbath," he added, calling the pro-Mubarak supporters a "bunch of thugs". ElBaradei has also urged the army to intervene.

"I ask the army to intervene to protect Egyptian lives," he told Al Jazeera, adding he said it should intervene "today" and not remain neutral.

Determined protesters

Despite the clashes, pro-democracy protesters seeking Mubarak's immediate resignation said they would not give up until Mubarak steps down.

Pro-Mubarak supporters on camels and horses charged at protesters [AJ online producer]

Mohammed el-Belgaty, a member of the Muslim Brotherhood, told Al Jazeera the "peaceful demonstrations in Tahrir Square have been turned into chaos".

"The speech delivered by President Mubarak was very provocative as he used very sentimental words.

"Mubarak is asking the people to choose between him or chaos."

Ahead of Wednesday's clashes, supporters of the president staged a number of rallies around Cairo, saying Mubarak represented stability amid growing insecurity, and calling those who want his departure "traitors."

"Yes to Mubarak, to protect stability," read one banner in a crowd of 500 gathered near state television headquarters, about 1km from Tahrir Square.

A witness said organisers were paying people $17, to take part in the pro-Mubarak rally, a claim that could not be confirmed.