Soldiers and riot police used tear gas and armoured vehicles to drive out hundreds of anti-government protesters occupying a landmark square in Bahrain's capital, a day after emergency rule was imposed in the violence-wracked Gulf kingdom.

Demonstrators said at least two people were killed.

The full-scale assault launched at daybreak swept into Pearl Square in Manama, which has been the centre of uprising against Bahrain's rulers since it began more than a month ago.

Stinging clouds of tear gas filled streets and black smoke rose from the square, possibly from the protesters' tents set ablaze.

Witnesses said at least two protesters were killed, but there was no official word on casualties from authorities.

It was unclear whether the offensive included soldiers from other Gulf nations who were dispatched to help Bahrain's Sunni monarchy, which has been under relentless pressure from the country's majority Shiite Muslims to give up its monopoly on power.

Helicopters criss-crossed over the square, which was cleared by security forces late last month but was later retaken by protesters after a deadly confrontation with army units.

Protesters fled for cover into side streets today and security forces blocked main roads into the capital. Mobile phones were apparently jammed in central Manama during the height of the attack and the internet service was at a crawl.

In Shiite villages, people went to mosques to pray in a sign of protest against the Pearl Square crackdown. Others lit fires in anger. Clashes were reported in other mostly Shiite areas of the country.

For Bahrain's authorities, clearing Pearl Square would be more of a symbolic blow against protesters than a strategic victory as opposition groups are still be able to mobilise marches and other actions against the leadership.

Bahrain's king yesterday declared a three-month state of emergency and instructed the military to battle unrest in the strategic nation, which hosts the US Navy's 5th Fleet.

Shortly after the announcement, clashes erupted across the island nation, killing at least two civilians. Saudi officials also said one of its soldiers was killed.

Bahrain's sectarian clash is increasingly viewed as an extension of the region's rivalries between the Gulf Arab leaders and Shiite powerhouse Iran.

Washington, too, is pulled deeply into the Bahrain's conflict because of its key naval base - the Pentagon's main Gulf counterweight to Iran's growing military ambitions.

Yesterday, Iran and its allied force in Lebanon, Hezbollah, denounced the presence of foreign soldiers in Bahrain. Iran has no direct political links with Bahrain's main Shiite groups, but Iranian hard-liners in the past have called the tiny island nation that "14th Province" of the Islamic Republic.

Gulf rulers, particularly Saudi Arabia, fear that the collapse of Bahrain's Sunni monarchy could embolden further revolts across the region and embolden the Saudi Shiite minority whose home region is connected to Bahrain by a causeway.

The state of emergency in the US-backed regime gives Bahrain's military chief wide authority to battle protesters demanding political reforms and equal rights for the majority Shiites.

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