Three people died and hundreds were injured on Saturday in some of the fiercest clashes between police and anti-government protesters since popular unrest started to batter faction-riven Yemen in January.
Two people were killed in the capital Sanaa and a boy of 2 died in the southern city of Mukalla, with fighting reported in at least two other cities as protests against President Ali Abdullah Saleh's 32-year rule turning ever more violent.
The United States said it was dismayed by the growing fatalities and called for calm, warning that Yemen could suffer the same fate as Libya unless there was dialogue.
Hundreds of police fired volleys of tear gas and used water cannon in a pre-dawn operation apparently aimed at preventing a makeshift protester camp spreading any further in Sanaa.
The crowds responded with a hail of rocks and live ammunition was fired. Injured demonstrators were carried to a nearby mosque which was turned into a makeshift medical centre.
A doctor said a young boy was fatally shot. Another source said the dead person was a man from eastern Yemen. Later, a man was shot dead as he watched clashes from his office window.
The Interior Ministry accused protesters of opening fire and said 161 police were injured.
Dozens of demonstrators were overcome by the teargas, with friends using torn pieces of cardboard to fan them as they lay stretched out on the ground, many of them barely conscious.
"The gas used by the police is strange. It causes cramps and a collapse of the nervous system," said Bashir al-Kahli, a doctor helping the injured.
The Interior Ministry denied using any sort of nerve gas.
By late afternoon occasional firing could be heard in the capital, but witnesses said a square by Sanaa university, which has become a focal point for protests, was calm.
U.S. calls for peaceful transition
The U.S. ambassador to Yemen said Saturday unrest in the Arabian Peninsula country had reached a "dangerous" phase and called for dialogue, as three more people died in anti-regime protests.
Ambassador Gerald M. Feierstein said the strategic US ally needed a "peaceful transition" rather than civil war.
"We consider this to be dangerous. We consider this not to be in the interest of the Yemeni people," he said of the latest violence.
The way forward was not through anarchy and chaos but "dialogue and negotiation," he told reporters.
He also reiterated Washington's concerns that al-Qaeda militants based in the impoverished country could capitalize on the unrest.
"We oppose simply saying that (President) Ali Abdullah Saleh should go without saying anything about what you think should happen next," Feierstein said.
"We oppose the idea of chaos, we oppose the idea that this will lead to a civil war or to violence."
Washington has urged Yemen's opposition groups, who are demanding Saleh's resignation this year after three decades in power, to consider his offer to devolve power to parliament and resign when his mandate expires in 2013.
The alternative to dialogue was civil war which would destroy Yemen's fragile economy and create space for Islamic extremists to operate, Feierstein said.
"Of course we believe that the uncertainty and instability is helpful to al-Qaeda and some of the extremist groups," he said.
US Special Forces troops are in Yemen helping to train anti-terror forces as the country struggles to contain al-Qaeda's local offshoot -- described by a State Department official recently as the biggest threat to the U.S. homeland.
The impoverished, tribal country is also wracked by a secessionist movement in the south and a Shiite insurgency in the north.
Responding to allegations the government had used poison gas against the protesters, the ambassador said: "We do not have the expertise to make any decisions about what kind of chemical agents were used."