The protest to demand the release of six detained security guards turned violent earlier on Monday, with demonstrators hurling rocks at a police station in southern Narathiwat province's Takbai district and overturning a military truck.
The protestors then tried to storm the building and a nearby district office.
Police and soldiers responded by firing water cannons and tear gas, while shooting in the air to scatter the crowd.
A police officer said on condition of anonymity that at least four people were killed in the violence.
Earlier, an official at Takbai district hospital said on condition of anonymity that at least one man had died and another 20 people had been treated for injuries suffered during the six-hour melee. Among the injured was a 10-year-old boy.
At nearby Sungai Kolok hospital, two protesters were treated, including one man who had been grazed by a bullet, said an emergency room official, who also asked not to be identified.
Further details were not immediately available.
Vichai Vesetrat, a prominent Muslim leader in Narathiwat, said several people had told him that at least five people were killed and that he believed the death toll could rise.
Meanwhile, the regional army commander, Lieutenant General Pisarm Wattanawongkhiri, declared a curfew in the three southern provinces of Yala, Pattani and Narathiwat from 10pm (1500 GMT) to 6am on Tuesday. "The curfew is effective immediately," he said.
The violence erupted after protesters spent the day camped outside a police station demanding the release of six local defence officials, arrested last week and accused of handing over their government-issued shotguns to resistance fighters.
A witness said the clash began after negotiations collapsed and police and soldiers fired tear gas at the crowd outside Tak Bai station in Narathiwat province.
Some of the demonstrators
lie on a pavement under arrest
Other witnesses added that the firing began after police used water cannon and tear gas to disperse the crowd.
"Rocks came from the protesters and security officers fired into the air. Pistol shots then came from the demonstrators," one witness said.
Thai premier Thaksin Shinawatra made an emergency trip to the area with two senior cabinet members.
"You cannot come and say they (the officials) are innocent and that the police have to release them; you have to wait until the investigation is over," he said before his departure.
The clashes come at a time of continuing tension in the area. On Sunday one state official was killed and a policeman wounded.
Violence in Thailand's Muslim-majority south, which covers three provinces, has claimed more than 360 lives this year, according to police.
Most Muslims seek widespread autonomy for the southern provinces where they primarily reside.
A small minority favours the creation of an independent state.
Rights groups such as HRW have
expressed concern over torture
Other groups are calling for greater political participation at all levels of decision-making, equal civil rights and status, and better economic opportunities including a larger share of public funds.
Even though the government has blamed insurgents for most of the attacks in the country, Muslim groups say they are being unfairly persecuted.
Human rights violations
The Thai government has often been accused of heavy-handedness in dealing with separatists.
Rights groups have also highlighted issues of human rights violations and torture.
According to a Human Rights Watch (HRW) report: "After recent reports that suspects in southern Thailand were tortured in police custody, HRW expressed concern about possible mistreatment of those arrested."
A prominent lawyer investigating these charges, Somchai Neelapaijit, has been missing since March and is presumed dead.