It was not immediately clear how widespread the new unrest was. Earlier, police said the unrest that had spread across many of France's towns and cities and shaken the government appeared to be waning.
Some 350 police officers were on duty in tough neighbourhoods in Toulouse where the cars were burned on Wednesday evening, authorities said. One of the cars was burned in a school playground.
Prime Minister Dominique de Villepin published a decree invoking a 55-year-old law - which was introduced to curb Algerian dissent prior to independence - that gives regional government officials sweeping powers to impose nightly curfews.
Authorities in Toulouse have not yet taken advantage of the emergency measures announced on Tuesday to halt the unrest by white youths as well as French-born citizens of African and Arab origin.
A poll in Le Parisien newspaper showed 73% support for the measures and 86% of those surveyed said they were outraged by the violence.
"We are seeing a sharp drop in hostile acts," the national police director, Michel Gaudin, told a news briefing.
Claude Gueant, an aide to Interior Minister Nicolas Sarkozy, said the unrest appeared to have peaked.
"We have reasons to believe that wisdom will prevail in the districts affected by the violence," he told Europe 1 radio.
Fears of riots erupting in other European countries have helped push down the value of the euro.
"We are seeing a sharp drop in hostile acts"
national police director
Neighbouring Belgium and Germany have been hit by copycat incidents of unrest but nothing large-scale.
Swedish Prime Minister Goran Persson criticised France's response to the unrest, saying emergency powers would not help to resolve the problems.
Major cities covered by the emergency powers include Marseille, Strasbourg, Lyon, Toulouse and the capital.
But in the Paris suburbs where the unrest erupted after the deaths of two youths, the local prefect said he had decided against a curfew because of a decrease in violence.
Racism and discrminiation
The violence started on 27 October among youths in a north-eastern Paris suburb angry over the deaths of two teenagers who were electrocuted, but had grown into a nationwide insurrection by suburban youth burning and clashing with police citing racism, police brutality and discrimination as primary causes.
They were electrocuted in a power station, while trying to avoid an identity search by police.
The government acknowledged that the grim conditions in the suburbs - chronic high unemployment, racial discrimination, miserable housing and drugs - had much to do with the discontent.
The mayhem is forcing France to confront anger building for decades in neglected suburbs and among the French-born children of mainly African origin.
Authorities in the Marseille region said children as young as 10 had been arrested since the beginning of the week.
Daniel Feurtet, communist mayor of the unrest-hit Blanc-Mesnil district in the north of Paris, threatened to quit over the emergency measures.
The Le Monde wrote that PM de
Villepin seems to be losing his cool
"If the prefect decides to impose a curfew in one of our areas, I'll hand in my resignation right away," he told Le Monde newspaper.
Economists expect consumer confidence to drop because of the rioting but say the impact on economic growth and the state budget is likely be marginal if calm returns soon. They see few signs of any long-term blow to foreign direct investment.
But Villepin and President Jacques Chirac are feeling a political impact and are under pressure to respond.
"The prime minister seems to be losing his cool," Le Monde wrote in an unusually harsh editorial, suggesting Villepin "does not have the nerves that a statesman needs".
Villepin declined to take questions during parliamentary question time on Wednesday.
Foreigners to be expelled
But Sarkozy told deputies some 120 foreigners convicted of participating in the disturbances would be expelled, including those with residence permits.
Sarkozy, accused of inflaming violence with tough talk, visited the hard-hit Essonne region early on Sunday.
Most contentious was Sarkozy's choice of language just before the unrest began, when he called people "rabble" and vowed to clean their districts "with a power-hose".
"If the prefect decides to impose a curfew in one of our areas, I'll hand in my resignation right away"
mayor of the Blanc-Mesnil district - north of Paris
"It was calm for a long time here. If there hadn't been Sarko's (Sarkozy's) words - 'power-hose,' 'rabble' - there wouldn't have been all this," a 22-year-old man in the northern tinderbox suburb of Aulnay-sous-Bois was quoted by AFP as saying.
"He makes us suffer, he's a racist. He's put fuel on the fire," Fatou, a 14-year-old boy of African background, said.
Sarkozy has been preparing a bid to run in 2007 presidential elections on the strength of "zero tolerance" law-and-order policies.