Riot police opened fire with automatic weapons on a crowd of students protesting economic reforms Tuesday, killing three people and wounding 13 others.
Police refused to say how many people died, but Dr. Bob Danaya at Port Moresby General Hospital confirmed the three deaths and other casualties.
Students had been blockading roads and government buildings for five days, keeping many people from getting to jobs in this capital. It was not immediately clear why police began firing tear gas and automatic weapons Tuesday.
Protesters later burned several government vehicles, torched a store and looted other shops in violent clashes.
Police Commissioner Sam Inguba appealed on radio for calm.
"There is no assurance of security at the moment," he said.
Prime Minister Mekere Morauta's government is unpopular because of austerity policies aimed at reforming the economy, which has been crippled by years of mismanagement and corruption.
The students, who have broad public support, claim that privatization will place large parts of the Pacific nation's economy under foreign control. They are demanding that the World Bank and other aid bodies pull out of the country.
Trade union groups have said they are considering calling strikes to halt transport services and power supplies if the government does not drop its economic reform drive.
Morauta appeared under heavy police guard late Monday to accept a student petition against the World Bank and other international bodies advising the government on reforms.