Thai security forces have fired live rounds after moving in to seal off a heavily defended encampment of protesters in the centre of Bangkok.
Protesters set fire to a police bus near foreign embassies as gunshots rang out, following clashes overnight that left one person dead in the capital.
A BBC correspondent says the area is like a warzone, with troops firing across a park at protesters.
The demonstrators want Prime Minister Abhisit Vejjajiva to step down.
Many of the red-shirts support former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup.
'Tightening the noose'
Overnight, security forces shut down the electricity supply to the area around the large protest camp in the city centre.
A renegade general backing the protest remains in a critical condition a day after he was shot by an unknown gunman.
On Friday, troops fired tear gas while advancing on dozens of protesters who had set up a checkpoint outside the Suan Lum night market to stop soldiers advancing on their main base.
Residents fled in panic as gunshots rang out and soldiers moved in to the area, which is popular with tourists.
Army spokesman Col Sunsern Kaewkumnerd was quoted by AFP news agency as saying: "They have intimidated authorities with weapons so security officials have asked the commander to disperse them."
The British embassy in the city has been temporarily closed amid the upsurge in violence.
Thousands of protesters, known as red-shirts after the colour they wear, have reinforced their bamboo barricades and vowed to maintain their camp in a commercial district of Bangkok until elections are called.
"They are tightening a noose on us but we will fight to the end, brothers and sisters," a protest leader, Nattawut Saikua, told a cheering crowd, reports news agency Reuters.
Guards were seen at the sprawling protest site armed with slingshots and arrows.
The authorities have also begun to cut public transport and some mobile phone services to the area occupied by the protesters.
'Expressionless'
The government has threatened for days to cut off power, water and food supplies to the red-shirt camp.
But the protesters have their own supplies and appear ready for a long siege, says our correspondent.
One protester was shot dead on Thursday night after a group of red-shirts confronted armed security personnel on the outskirts of the encampment.
The clashes followed the wounding of a renegade Thai general who had been organising the red-shirts' security.
Khattiya Sawasdipol, better known as Seh Daeng (Commander Red), was shot in the head and seriously injured.
Seh Daeng is part of the protesters' more radical wing and had accused red-shirt leaders - many of whom have distanced themselves from him - of not being hard-line enough.
Circumstances surrounding the shooting, near the Silom business area, are not clear.
A New York Times journalist, Thomas Fuller, was interviewing the general at the moment the shot rang out.
The reporter told the BBC's World Today: "He immediately dropped to the ground, his eyes were open but he was expressionless and his body wasn't moving at all."
A spokesman for the red-shirt movement blamed an army sniper but military officials said troops had orders to fire only in self-defence.
The protesters - who have been occupying parts of Bangkok for more than two months - want Prime Minister Abhisit to dissolve parliament and call fresh elections.
Their camp stretches from the city's shopping district south to its business hub.
Thailand's worst political unrest in nearly two decades has left some 30 people dead and more than 1,400 wounded.
Mr Abhisit is under severe pressure to end the protests, which have paralysed Bangkok since mid-March.
He had offered polls on 14 November - but the two sides failed to agree a deal because of divisions over who should be held accountable for a deadly crackdown on protests last month.
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