Twenty suspects of the banned Mungiki sect were arrested while Kenyan police fired live rounds into the air as they tried to break up a meeting of the Mau Mau movement.
Chaos ruled the streets as police chased, beat up and arrested several of the sect members.
Police said about 500 sect members had hijacked and disrupted the first Mau Mau rally called one month after Kenya's government lifted a ban on the movement.
An official of the Mau Mau said they had planned a procession in the city's streets to hold prayers and thank the government for lifting the ban. Police asked them not to march but only to meet at their office in the city.
The Mau Mau uprising pushed the east African country towards black rule and independence in 1963.
About 40 old ex-Mau Mau members had converged for the rally.
"We anticipated the Mau Mau meeting would be hijacked by the Mungiki," Job Khaemba, a police superintendent who coordinated the anti-riot police dispersing the sect members told Reuters.
"That is why we ordered the Mau Mau not to make a procession in the streets as they had planned. Those who disrupted the meeting are Mungikis, the young boys."
Fought British colonialists
Twenty Mungiki suspects were
arrested by Kenyan authorities
Mungiki is credited with spearheading the uprising against British colonialists in Kenya in the 1950s.
But Mungiki, meaning "multitude" in the language of the Kikuyu, was banned in March 2002 after police blamed it for a spate of knife and spear killings.
Considered Kenya's largest tribe, Mungiki groups thousands of poor male youths, many of them former street children.
More than 50 shots rang out in the city centre as police fired both live and blank bullets in the air to disperse the chanting Mungiki mobs marching in the city's busy streets.
Shoppers fled and shops closed as the Mungiki members stoned police and motorists before hiding in back-streets.
The Mungiki members later regrouped and marched to the city's Uhuru Park grounds where national political rallies are held, but police fired teargas canisters to disperse them.
Several of those arrested were beaten by anti-riot police and bundled onto the back of an open police Land Rover. About 100 anti-riot police were involved in the street fight.
In August, Security Minister Chris Murungaru said he had scrapped the colonial-era law which outlawed the Mau Mau and branded them "terrorists".
Lifting the ban could open the way for a claim from the surviving fighters for compensation from the British government for the torture they say then endured during the rebellion.
Most Mau Mau had property, cattle, farmland and food confiscated in a tough British campaign of dispossession and detention. Many today live in poverty.