Thai security forces have fired live rounds after moving to seal a heavily defended demonstrators' camp in Bangkok amid clashes that left two people dead.
Embassies were closed as protesters set fire to a police bus and shot fireworks at troops, who also responded with tear gas and rubber bullets.
Our correspondent says the area is like a war zone, with troops firing into a park as a helicopter circled overhead.
The demonstrators want the prime minister to resign and call elections.
Many of the so-called red-shirt protesters support former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup.
Journalists shot
The Bangkok authorities have cut off water and electricity to the camp in a renewed effort by the Thai government to reclaim the city centre.
AT THE SCENE
BBC's Alastair Leithead
Alastair Leithead, BBC News, Bangkok
The centre of Bangkok is a no-go area. I'm on the main diplomatic street where a lot of the foreign embassies are.
A short time ago the alarm went off in the park to mark midday and it was eerily quiet, but 10 minutes earlier there was heavy gunfire.
The troops were firing a considerable number of rounds into a park, on the other side of which the protesters have control.
There are areas of confrontation all around the centre of Bangkok. It's heavily militarised. The troops have been firing rubber bullets, tear gas and live rounds.
This road is blocked by a burnt-out bus and by a whole group of red-shirt protesters who have been shooting fireworks at the military.
The whole of this central area is being buzzed by a helicopter. We are hearing reports of someone being killed on the road nearby.
The centre of Bangkok is a very dangerous place to be.
Violence escalated after a renegade general who was backing the protest was shot by an unknown gunman on Thursday, leaving him in a critical condition.
The British embassy was among several foreign missions closed on Friday.
One person has been killed and a demonstrator was shot dead on Thursday night.
A France 24 TV reporter was hit by a round, and there were reports two Thai journalists had also been shot.
Residents fled as gunfire rang out when thousands of soldiers moved in to seal off access to the protesters' camp.
The troops advanced on hundreds of demonstrators who had set up a checkpoint outside the Suan Lum night market, popular with tourists, to stop soldiers approaching their main base.
A government spokesman, Panitan Wattanayagorn, told the BBC's World Today the security forces were not trying to storm the barricades.
"We want to cut down a number of activities including the logistics, sending in the fuel and gasoline trucks," he said.
'Tightening the noose'
Thousands of protesters, including women and children, have reinforced their bamboo barricades and vowed to maintain their sprawling camp in a commercial district of Bangkok.
If you are here, think whether it is essential for you to be travelling around the city in the current environment
Quinton Quayle
British ambassador
Live: Unrest in Bangkok
British embassy in Bangkok shuts
In Pictures: Bangkok violence
"They are tightening a noose on us but we will fight to the end, brothers and sisters," one 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, most of whom are rural poor.
With their own supplies of water and food, the demonstrators appear braced for a long siege, says our correspondent.
Who shot Red?
The latest clashes come a day after a rogue Thai general who had been organising the red-shirts' security was shot in the head.
RED-SHIRT PROTEST
14 Mar: Red-shirts converge on Bangkok, hold first big rally, occupy government district
16 Mar: Protesters splash their own blood at Government House
30 Mar: A round of talks with the government ends in deadlock
3 Apr: Red-shirts occupy Bangkok shopping district
7 Apr: PM Abhisit orders state of emergency
10 Apr: Troops try to clear protesters; 25 people are killed and hundreds injured
22 Apr: Grenade blasts kill one and injure 85 near protest hub; each side blames the other
28 Apr: Policeman shot in clashes in northern Bangkok
Profile: Thailand's reds and yellows
Thai protests: Eyewitness accounts
Profie: 'Commander Red'
Khattiya Sawasdipol, better known as Seh Daeng (Commander Red), is in a Bangkok intensive care unit with a low chance of survival, a hospital official told AFP news agency.
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.
A New York Times journalist, Thomas Fuller, was interviewing the general at the moment the shot rang out near the Silom business area.
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.
Theprotesters - who have been occupying parts of Bangkok for more than two months - want Prime Minister Abhisit Vejjajiva to dissolve parliament and call fresh elections.
He had offered polls in 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.
Thailand's worst political unrest in nearly two decades has left at least 30 people dead and more than 1,400 wounded.
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