The clash happened on Tuesday evening in Dongzhou village in Shanwei city when hundreds of officers from the People's Armed Police - a unit of the People's Liberation Army - were sent in to disperse the villagers, residents said on Wednesday.
"The People's Armed Police entered the village, they opened fire and shot to death four people," said a villager by telephone.
"Two died in a local hospital and two were taken to a hospital in Shanwei's urban centre, but they died, too," he said before his phone appeared to be cut off.
A teacher at the Dongzhou Middle School said he did not see the incident because he lived outside the village, but learned about it when he arrived at work earlier in the day.
"It's mainly because of land dispute. Compensation was one of the problems," said the teacher, who declined to be named.
According to locals interviewed by the US-based Radio Free Asia, the villagers had been demanding that the government should compensate them fairly for building the power plant, but their requests were denied.
Tensions have escalated for many months and came to a climax on Tuesday, according to villagers and protesters quoted by Radio Free Asia.
Villagers depend on a nearby lake
to raise fishery products
"They were firing shots. But they were afraid to move in. We had blocked the roads with water pipes, gasoline and detonators," a villager who called RFA late on Tuesday said.
Another villager Radio Free Asia quoted said "many" villagers had suffered shotgun wounds.
"I don't know what kind of guns. I just know they were using real bullets on us. No policemen were wounded," the villager added.
The radio station said it had confirmed that two people had been killed, and quoted villagers as saying four had died.
The villager who spoke to AFP said the government began building the power plant last year.
The power plant will be a coal-fired operation that occupies a large amount of land and prohibits villagers from using a nearby lake for raising fishery products and collecting other aquatic products.
"They didn't get the villagers' permission to take the land. They didn't compensate villagers enough. That was the main reason for the dispute. Now we can't even use the lake"
"They didn't get the villagers' permission to take the land. They didn't compensate villagers enough. That was the main reason for the dispute," the villager said.
"Now we can't even use the lake. We have very little land. We depend on raising fishery products to make a living."
Shanwei city police and city government officials said they did not have any knowledge of the incident and declined to comment.