Protesters in Tibet's capital burnt shops and vehicles and yelled for independence on Friday as the Himalayan region was hit by its biggest protests in two decades, prompting the Dalai Lama to warn Beijing against using "brute force".
There were also reports at least two people died in the violence, possibly more.
Peaceful street marches by Tibetan Buddhist monks over past days gave way to angry crowds of hundreds who confronted anti-riot police in the remote region -- testing China's grip on control just as it readies for the Olympic Games.
"Now it's very chaotic outside," an ethnic Tibetan resident said by telephone.
"People have been burning cars and motorbikes and buses. There is smoke everywhere and they have been throwing rocks and breaking windows. We're scared."
US-funded Radio Free Asia said Chinese police fired on rioting Tibetan protesters, killing at least two.
Residents around the Jokhang temple in old Lhasa which was a scene of protests said they were hiding indoors.
Some said they had seen lines of anti-riot police, but none spoke of gunfire. "We are waiting to see what will happen tomorrow," said an ethnic Tibetan woman. "It could get much worse."
Up to 400 protesters, including students, had gathered around a market near the Jokhang temple early on Friday and were confronted by about 1,000 police, according to a witness cited by Matt Whitticase of the Free Tibet Campaign in London.
Four police were injured in the contention that followed, and another protest broke out near the Potala Palace, Whitticase added.
An ethnic Tibetan resident said there were "protests everywhere" accompanied by shouts for independence from China.
"It's no longer just the monks. Now they have been joined by lots of residents," the man said.
The eruption of anger comes despite Beijing's repeated claims Tibetans are grateful for improved lives, and it threatens to stain preparations for the Olympics, when the government hopes to show off national prosperity and harmony.
"These protests are a manifestation of the deep-rooted resentment of the Tibetan people under the present governance," Tibet's exiled spiritual leader, the Dalai Lama, said in a statement.
"I therefore appeal to the Chinese leadership to stop using force and address the long-simmering resentment of the Tibetan people through dialogue with the Tibetan people."
The United States and European Union both urged China to show restraint, and the United States pressed China to engage in dialogue with the Dalai Lama, whom Beijing condemns as a "separatist."
As Beijing prepares to host the Olympics in August, the protests present hard choices for President Hu Jintao, who was Communist Party boss in the region in 1989 when China imposed martial law there to quell anti-Chinese protest.
UNREST AND OLYMPICS
The mountainous Buddhist region has been periodically restive since Chinese troops invaded in 1950. Nine years later, the Dalai Lama staged a failed uprising against Chinese rule and fled to India.
China's role in Tibet has become a focus for critics in the run-up to the Olympics, with global marches this week to mark the 49th anniversary of a failed uprising against Communist rule.
Those marches apparently galvanised Buddhist monks to take to Lhasa's streets, defying a heavy police presence and reports of lockdowns on several monasteries.
There was silence in Chinese-language state media about the violence.
On Friday, 300 to 400 residents and monks demonstrated in Lhasa, a source cited a witness as saying. More than 10 monks had been arrested and tanks were patrolling the square near the Potala Palace, the source said, referring to what was once the winter residence of the Dalai Lama.
Witnesses said a number of shops were set on fire, and a report from China's Xinhua news agency said the Tromsikhang Market in central Lhasa was in flames.
Residents spoke of tense chaos around the city, and one Tibetan man said Tibetans and minority Hui Muslim traders from other parts of China had fought each other with rocks and knives.
A Han Chinese resident said the protests were being directed at the city's Chinese population. "The Han Chinese are really scared," the resident said. "We have been told not to go outside."
Two residents reached by telephone referred to martial law. But that could not be confirmed and China's State Council Information Office declined to comment.
The demonstrations in Lhasa earlier also spilled into at least one other ethnic Tibetan area of China.
Hundreds of monks from the Labrang monastery in the northwestern province of Gansu led a march through the town of Xiahe, the Free Tibet Campaign said, citing sources in Dharamsala, home to Tibet's government-in-exile.
(Additional reporting by Ben Blanchard and Benjamin Kang Lim in Beijing, Jonathan Allen in New Delhi and Huw Jones and Adrian Croft in Brussels)