Thai security forces have fired rounds after moving in to seal a heavily defended encampment of protesters in the centre of Bangkok.
Embassies were closed as protesters set fire to a police bus and gunshots rang out, amid fierce clashes on Friday.
Hospitals in the capital say two people have been killed and at least 18 wounded, including three journalists.
The BBC reports the area is like a war zone, with troops firing into a park as a helicopter buzzes above on Friday. Residents fled in panic as soldiers moved into the camp area, which is popular with tourists.
The anti-government protesters want Prime Minister Abhisit Vejjajiva to resign and call elections. Many of the so-called red-shirt protesters support former prime minister Thaksin Shinawatra, who was ousted in a 2006 coup.
Overnight on Thursday security forces shut down the electricity supply to the area around the large protest camp in the city centre.
A renegade general, who supports the protest, remains in a critical condition a day after he was shot by an unknown gunman.
Mr Abhisit is under pressure to end the violent political crisis that has killed at least 29 people, wounded more than 1,400, paralysed parts of the capital.
On Wednesday, he cancelled a proposed 14 November election and called off talks with the protesters after they raised new demands.
The 22-member red shirt leadership council has struggled to find common ground on how to end the protests.