Anti-government demonstrators vowing a "final stand" unless the government resigns fought bloody street battles with troops Monday, then clashed with residents angry about the disruptions, killing two people.

During the day, troops drove back rampaging protesters with warning shots from automatic weapons, and by nightfall clashes that gripped several parts of the city, wounding 113 people, had ebbed. But as the demonstrators tried to make their way back to their base, deadly fighting erupted between them and residents.

Prime Minister Abhisit Vejjajiva praised the efforts of security forces, saying they used "soft means" and "prevented as much damage as possible," though ousted former Prime Minister Thaksin Shinawatra — the man most protesters consider their leader — accused the military of covering up the number of people killed in the day's battles.

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Abhisit said the news that two people had been killed and 12 wounded in a gunbattle between protesters and residents at Nang Lerng market was "a regrettable incident." But he said that "with the cooperation of the public, I believe success (in restoring peace) is near."

Political tensions have simmered since 2006 when Thaksin was ousted by a military coup amid accusations of corruption and abuse of power. He remains popular in the impoverished countryside for his populist policies.

Since then, political tensions have run high between his supporters, known as "red shirts," and the so-called "yellow shirts," a mix of royalists, academics, professionals and retired military who oppose the former prime minister.

Last year, the yellow shirts shut down Bangkok's two main airports, ending their demonstrations when a court disqualified the pro-Thaksin prime minister for electoral fraud and Abhisit was appointed prime minister.

The red shirts took to the streets last month, using tactics similar to those of their rivals last year. They accuse the country's elite — the military, judiciary and other unelected officials — of interfering in politics, and are seeking Thaksin's rehabilitation. Their numbers grew to 100,000 in Bangkok last week.

Protesters have been stationed at a half-dozen points in Bangkok, defying government-imposed state-of-emergency measures that ban gatherings of more than five people.

Monday's fighting came as protesters moved back toward their base outside the prime minister's offices at Government House, where they have been holding out since March 26. An estimated 5,000 protesters are gathered there.

Hundreds of protesters and residents faced off outside the market, Police Col. Rangsan Praditpon said, and hurled Molotov cocktails and shot at one another. It was not clear who fired first.

"The protesters were upset that the vendors were giving food and water to the soldiers and cheering them on," he said. "The vendors in the evening became more angry when protesters threatened to burn down their houses. Both sides were armed."

Earlier Monday, protesters hijacked and torched public buses to block several key intersections, set tires and vehicles on fire and sent two unmanned buses, one of them burning, hurtling toward lines of soldiers.

They hurled a small explosive into the Army Headquarters compound, burning an armored vehicle, and when a building in the Education Ministry compound caught fire, they attempted to block approaching fire trucks.

In a confrontation near Victory Monument, a major traffic circle, a line of troops in full battle gear fired volleys of M-16 fire over the heads of protesters, and turned water cannons on the crowd.

The army spokesman said troops fired blanks into the crowds and live shots overhead. But in an appearance on CNN, Thaksin — who most of the protesters consider their leader — accused the military of lying, saying soldiers used live ammunition, killed protesters and dragged away their bodies.

"They shot people. Many died. Many people were injured," he said.

Abhisit dismissed Thaksin's assertion, saying "if there were that many people killed, it would not have escaped the eye of the media."

The government said the day's clashes had killed two and wounded 113.

With their lines elsewhere in the city weakened by the military, protest leaders called on the red shirts to retreat to Government House.

"This will be our final stand. I beg that you return here and face them together," protest leader Jatuporn Phromphan shouted from a stage at the protest site.

Army spokesman Col. Sansern Kaewkamnerd said some of the 6,000 troops deployed in Bangkok were heading to the vicinity around the seat of government and police had set up roadblocks to prevent more protesters from joining in.

Abhisit said he would listen to demonstrators at Government House who had engaged in peaceful and legal protest.

The sight of the army moving in on protesters was in stark contrast to the total lapse of security that occurred over the weekend, when a 16-nation Asian summit was canceled after demonstrators stormed the venue.

This week's clashes, combined with November's airport shutdown, will likely slash the country's tourism revenue by a third this year, or 200 billion baht ($5.6 billion), said Kongkrit Hiranyakit, chairman of the Tourism Council of Thailand.

Several countries issued travel advisories Monday, and the U.S. Embassy urged Americans "to avoid the areas of demonstrations and to exercise caution anywhere in Bangkok."

Monday marked the beginning of the Thai New Year, normally the country's most joyous holiday. The Bangkok municipal government canceled all its festivities, but despite the rioting many Thais and foreign tourists began engaging in ritualistic water throwing and general partying.