Swathes of the Thai capital were declared a 'live firing' killing zone by the army yesterday, as the death toll in Bangkok rose to 22 after days of violent protest.
And last night Prime Minister Abhisit Vejjajiva said his security forces would not retreat.
As troops attempted to quell the trouble, they fired live rounds at hundreds of protesters who are seeking to topple the government.
Demonstrators fought back by hurling petrol bombs, rocks and crude homemade rockets. Around a third of the city is now under emergency rule.
A volunteer medical rescue worker was shot and feared dead yesterday and at least four protesters were also shot and badly wounded.
In a televised address Mr Vejjajiva said: 'The government has to go forward. We cannot retreat. What we are doing is for the benefit of the country. We cannot leave the country in the hands of armed groups.'
Anti-government protesters are backed by ousted Prime Minister Thaksin Shinawatra, the billionaire former owner of Manchester City. They want Mr Vejjajiva to dissolve parliament and call fresh elections.
As they fought the army on the streets, one motorcyclist was hit by a stray bullet. In another incident a journalist from the Bangkok Nation newspaper was shot. And a rescue worker was shot in the head as he tried to get a casualty into an ambulance.
Despite claims by the Thai government that the situation is under control and that its soldiers have only fired in self-defence, army snipers have been accused of targeting protesters. Footage from Bangkok yesterday showed the Red Shirts dragging gunshot victims to safety.
At the Din Daeng intersection, north of the main protest site, three bodies were taken away on stretchers, witnesses said, indicating that the death toll could rise further. Two had suffered head wounds.
The incidents yesterday followed a night of grenade explosions and sporadic gunfire as the army battled to set up a perimeter around the protesters' barricaded encampment where thousands refuse to leave, including women and children.
Hardcore protesters set fire to vehicles, including an army truck, and hurled rocks at troops as they tried to set up razor-wire at checkpoints.
The violence has been escalating since Thursday after a renegade general who supports the Red Shirts' protest was shot in the head by an unknown gunman. General Khattiya Sawasdipol, better known as Seh Daeng (Commander Red), is in a critical condition and unlikely to survive.
The British Embassy in Bangkok has been temporarily closed. Thai army spokesman Colonel Sansern Kaewkamnerd said the security steps - including the 'live fire zone' - had halved the number of protesters in the camp to 5,000.
Inside the camp, Red Shirt leader Kwanchai Praipana said stocks were running low because of the blockade but added that they would last 'for days'.
He said: 'We'll keep on fighting until the government takes responsibility.'
In a message from New York, U.N. Secretary-General Ban Ki-moon appealed to both sides to 'do all within their power to avoid further violence and loss of life'.
But, with negotiations terminated, the situation appeared headed toward a final showdown on the streets.
Jatuporn Prompan, a protest leader, said today: 'The situation right now is getting closer to civil war every minute. We have to fight on. The leaders shouldn't even think about retreat when our brothers are ready to fight on.'
The Red Shirt protesters began their latest campaign to oust the government in March, saying it came to power illegitimately and is indifferent to the poor. In several rounds of violence since then, a total 43 people have been killed and at least 1,620 wounded, according to a government toll that includes the most recent clashes.
Protesters have urged 82-year-old King Bhumibol Adulyadej to end his long silence and intervene, but there was no word from the widely revered ailing monarch.
Tyrell Haberkorn, a political scientist with The Australian National University, said: 'I am gravely concerned that a bloody suppression will only further entrench the culture of violence in Thailand.'
She said the protests stemmed from the outrage that the marginalized majority felt at the lack of say they had in governance, which was largely in the hands of the elites.
She added:'If one listens to the protesters... people are willing to risk their lives because they believe that they are making a more just Thai society for themselves, their children and their grandchildren.'
The latest violence erupted after the Red Shirts' military strategist - a former Thai general - was shot and seriously injured, apparently by a sharpshooter, as he spoke to foreign journalists on Thursday.
Witnesses saw several groups of a dozen or more people detained at the scene of several clashes.
No figures were released on how many were detained.
As night fell yesterday, defiant Red Shirt leaders led followers in Buddhist prayers and called on volunteers to bring more tires for their barricades.
Another protest leader, Weng Tojirakarn, demanded today that the government declare a cease-fire and pull back its troops because 'we don't want to see a civil war. If it does happen, I don't know how many years it will take to end'.
The Red Shirts, mostly rural poor, began camping in the capital March 12 to try to force out the prime minister.They claim his coalition government came to power through manipulation of the courts and the backing of the powerful military.
The military had forced Thaksin Shinawatra, the populist premier favored by the Red Shirts, from office in a 2006 coup. Two subsequent pro-Thaksin governments were disbanded by court rulings before Mr Abhisit became prime minister.
About 10,000 Red Shirts have barricaded themselves in a protest zone in Rajprasong, Bangkok's premier shopping and diplomatic enclave. They have set up a perimeter of tires and bamboo stakes, refusing to leave until Mr Abhisit dissolves parliament and calls new elections.
The occupation has forced luxury hotels and high-end shops to close for weeks. Major roads around the protest site were blocked to traffic today, and the city's subway and elevated train shut down. The embassies of the United States, Britain and other countries were also closed.
The political uncertainty has spooked foreign investors and damaged the vital tourism industry, which accounts for six per cent of the economy.
The crisis had appeared to be reaching a resolution last week when Mr Abhisit offered to hold elections in November, a year early. But the hopes were dashed after Red Shirt leaders made more demands.