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After police fired tear gas in an attempt to disperse crowds of demonstrators in the streets, people among the protesters began firing guns at police.
With the two sides about 200 meters (656 feet) apart, police responded by firing rubber bullets and live ammunition.
During the firefight, which lasted about 20 minutes, a grenade exploded near a group of police officers, knocking them to the ground. At least four of them were wounded, said Lt. Gen. Paradon Patthanathabut, the national security chief.
Thousands of protesters
About 6,000 demonstrators were estimated to be on the streets of the city Tuesday, Paradon said, and thousands of security personnel have been mobilized.
Protesters opposed to Yingluck have been camped out since November at official buildings around the city, including Government House, the office of the prime minister and appointed cabinet ministers.
Leaders of the protests say they want Yingluck's government replaced by an unelected "people council," which would oversee electoral and political changes.
Clashes among pro- and anti-government groups had flared up during the crisis, leaving at least 10 people dead and hundreds wounded. The government responded by imposing a state of emergency last month.
Police move in
Until recently, authorities had largely refrained from confronting the demonstrators directly, even when they prevented large numbers of people from voting in recent elections.
That changed last week as police began attempts to seize sites occupied by protesters for months.
Government officials said the protesters' actions were blocking public access to government services, making intervention by authorities necessary.
Officials claimed public sentiment was turning against the demonstrators. But the protesters have so far refused to give way.
Police said they arrested 145 protesters near the Ministry of Energy on Tuesday.
Rice subsidy controversy
As the violence unfolded on the streets, Yingluck faced pressure on another front when Thailand's anti-corruption commission said it was bringing charges against her over a rice-subsidy program.
The National Counter-Corruption Commission said in a statement that it was calling Yingluck to appear February 27 to face charges that she failed to act on warnings of corruption in the program that her government introduced in 2011.
The program, which offered farmers well above the market rate for their rice, has run into financial problems. Problems with the subsidy program have angered many farmers, who make up part of Yingluck's support base in the north and east of Thailand.
The anti-corruption commission's charges could eventually lead to the suspension of Yingluck from all political positions.
In a televised speech before the commission's announcement, Yingluck said the rice subsidy program had been successful over the past two years and accused her political opponents of "obstructing the government's implementation of the project."
She said there was "no conspiracy to corrupt."
Long-running crisis
Protesters say Yingluck is a puppet of her billionaire brother, the deposed, exiled former Prime Minister Thaksin Shinawatra.
The protests were sparked in November by Yingluck's government's botched attempt to pass an amnesty bill that would have paved the way for her brother's return to the political fray in earnest.
Yingluck had hoped the elections held earlier this month could help ease tensions. But the main opposition party boycotted the vote and protesters caused widespread disruption.
That left the outcome of the election inconclusive, without enough results to reopen parliament.
It remains unclear when election officials will be able to complete the voting in disrupted areas.
The civil unrest of recent months is the worst to hit Thailand since a crackdown on pro-Thaksin demonstrators in 2010 left scores of people dead.
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