security forces surrounded the sprawling Rabaa al-Adawiya camp in east Cairo and a similar one at Al-Nahda square, in the centre of the capital.
Witnesses and an AFP correspondent said police rained canisters of tear gas down onto tents before entering Rabaa al-Adawiya, sparking pandemonium among the thousands of protesters who set up the camp soon after Morsi was ousted by the army on July 3.
Men in gas masks rushed to grab each canister and dunk them in containers of water, as the main stage near the mosque of the camp blared Islamic anthems and protesters chanted "Allahu Akbar" (God is greatest.) Read: Egypt police storm two pro-Morsi camps in Cairo
Clashes quickly erupted between protesters and security forces on one side of the camp, as automatic fire could be heard. It was not immediately clear who was doing the shooting.
Egyptian security forces clear a sit-in by supporters of ousted Islamist president Mohammed Morsi in the eastern Nasr City district of Cairo, Egypt. (AP Photo)
Television footage showed injured people being carried to a makeshift medical centre as well as police dragging away protesters, who have defied numerous ultimatums to end their demonstrations.
Protest leaders wearing gas masks stood defiantly on a stage while crowds of people wearing face masks stood amid the swirling tear gas as bulldozers began dismantling the camp.
Egypt's interior ministry mid-morning said security forces have "total control" over Al-Nahda Square, the smaller of the two camps.
"Police forces have managed to remove most of the tents in the square," the ministry said.
A security official told AFP that dozens of Morsi supporters had been arrested with the help of residents of the area.
Supporters of ousted president Mohamed Morsi and members of the Muslim Brotherhood gesture as Egyptian security forces (unseen) move in to disperse their protest camp near Cairo's Rabaa al-Adawiya mosque. (AFP Photo)
Television footage showed protesters who had been rounded up sitting in the ground handcuffed and surrounded by security forces.
Families, with their children, carrying plastic bags were seen being escorted out of the square by police.
Railway authorities announced that all trains had been grounded to prevent protesters from moving outside of Cairo and reassembling. Read: Egypt wonders if army chief General Sisi is another Nasser
Morsi's Muslim Brotherhood urged Egyptians to take to the streets in their thousands to denounce the "massacre".
"This is not an attempt to disperse, but a bloody attempt to crush all voices of opposition to the military coup," Brotherhood spokesman Gehad al-Haddad said on Twitter.
Egyptian security forces clear a sit-in by supporters of ousted Islamist President Mohammed Morsi in the eastern Nasr City district of Cairo, Egypt. (AP Photo)
The Rabaa al-Adawiya protest camp, where several Brotherhood leaders are staying, "is calling on Egyptians to take to the streets to stop the massacre," Haddad said.
In a separate tweet, Haddad said at least 250 people were killed and over 5,000 injured in the crackdown. There was no immediate independent confirmation of the tolls.
An AFP correspondent counted 43 bodies at a makeshift morgue at Rabaa al-Adawiya, adding that many appeared to have died from gunshot wounds.
There were no women or children among the dead, the correspondent said.
Police barred journalists not already in the camp from entering.
Egypt's interior ministry said two members of the security forces were killed in the operation.
Egyptian security forces clear a sit-in camp set up by supporters of ousted Islamist president Mohammed Morsi in Nasr City district, Cairo, Egypt. (AP Photo)
The crackdown came just hours after the United States urged the military-backed interim government to allow Morsi supporters to protest freely.
State Department deputy spokeswoman Marie Harf said Washington regarded freedom to protest as a "key part" of the democratic process but would be concerned by reports of violence.
The United States, which provides $1.5 billion in mostly military aid to Egypt every year, maintains close ties to the Egyptian military but says it favours a rapid return to elected civilian rule.
Morsi, Egypt's first elected president, was overthrown by the military on July 3 with popular backing.
His supporters had said nothing short of his reinstatement would persuade them to disperse.
An Egyptian policeman holds a copy of the Koran as security forces move in to disperse a protest camp held by supporters of ousted president Mohamed Morsi and members of the Muslim Brotherhood near Cairo's Rabaa al-Adawiya mosque. (AFP Photo)
Clashes between pro- and anti-Morsi demonstrators and security forces have killed more than 250 people since the end of June. Read: Morsi supporters torch church in central Egypt: agency
On Monday, the judiciary extended Morsi's detention for a further 15 days pending an investigation into his collaboration with Palestinian group Hamas.
The Muslim Brotherhood, banned in 1954 and repressed by successive governments, won both parliamentary and presidential elections in 2011 after the ouster of veteran strongman Hosni Mubarak.
Prosecutors have set an August 25 date for the trial of the Brotherhood Supreme Guide Mohammed Badie and his two deputies.