It was the worst internal Palestinian violence in the Gaza Strip since the beginning of self-rule from Israel in May.
Dozens of Palestinian youths responded to the incident by storming and burning an Israeli army checkpoint outside a Jewish settlement in the Gaza Strip, witnesses said.
According to witnesses, Palestinian police began shooting outside Gaza City's Palestine mosque after they removed loudspeakers from a truck about to be used at a rally by the militant Hamas Islamic Resistance Movement and Islamic Jihad.
Angry onlookers attacked the police, who then opened fire.
A PLO source said the police acted on information that Islamic Jihad men planning a demonstration were armed.
"The Islamic Jihad were planning a demonstration and they had weapons. The Palestinian police tried to disperse them and clashes erupted and shots were fired," the source said.
The Palestine mosque in the center of Gaza City is known as a Hamas stronghold.
The police fired warning shots into the air, then aimed at the crowd. Police also beat people with clubs as they retreated before the crowds.
Officials at Gaza's Shifa hospital said several hours after the clashes erupted and spread across the city that at least nine people were killed and 170 wounded.
Hundreds of relatives gathered on Gaza's streets and outside the hospital, shouting slogans against PLO chairman Yasser Arafat, whose nom de guerre is Abu Ammar.
"Abu Ammar is a traitor, Abu Ammar is a collaborator," the crowds chanted.
In a statement faxed to an international news agency Hamas said the Palestinian Authority had committed "ugly crimes against innocent worshippers". Hamas described the shootings as a "massacre" and called on Palestinians to defy the police.
Hamas and Islamic Jihad, which have been responsible for recent suicide bombings in Israel and against Israeli soldiers guarding one of the Jewish settlements remaining in Gaza, lead Palestinian opposition to the self-rule agreement.
Arafat, under pressure from Israel to curb their guerrilla activities, has moved against both groups twice since last month, arresting hundreds of activists and vowing to prevent them from carrying arms outdoors.
Israeli troops pulled out of most of Gaza in May under a peace deal with the Palestine Liberation Organization.
Some of the casualties occurred after the original clash, when crowds ignored a police curfew and sporadic shooting broke out along the city's streets.
About 200 demonstrators threw stones at the Saraya police headquarters, a former Israeli army base. Plainclothes and uniformed Palestinian security forces fired at the crowd, causing casualties.
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