Thai army moves to quell protests
The protesters reacted by hurling petrol bombs and driving buses they had commandeered at the lines of troops.
The government has said it is taking measures to secure major ports and airports.
Prime Minister Abhisit Vejjajiva declared a state of emergency on Sunday after the protests forced the cancellation of a major meeting of Asian leaders in the resort city of Pattaya.
The red-shirted protesters - many thousands of whom are camped outside Bangkok's Government House - have vowed to stay until Mr Abhisit resigns.
Water cannon
Monday's clashes broke out after the military moved in the early hours to clear around 200 protesters at Din Daeng intersection, around 2km (1.2 miles) from government buildings.
There were hours of skirmishes as demonstrators threw petrol bombs and rocks at lines of troops, who were carrying riot shields and automatic weapons, reports the BBC's Alastair Leithead from the scene.
The soldiers did not break their line until a bus, one of several commandeered by the protesters, was set alight.
They then moved in with water cannon to put out the flames, before opening fire with live rounds.
Many soldiers shot above the protesters' heads, but some were clearly firing into the crowd, our correspondent said.
A second round of firing came after a bus was driven towards the military, before crashing into a motorway barrier.
The prime minister said 70 people had been injured, including 23 soldiers.
Monday is the start of a three-day holiday for the Thai New Year and many people have already left the capital for the provinces.