Australian peacekeepers forced around 100 of the young men away from Dili's largest camp after they attacked it, an Associated Press reporter at the scene said.
Witnesses said more than 20 houses were torched elsewhere in the city in what appeared to be fresh outbreaks of ethnic violence. There was no word on injuries.
On Tuesday, angry crowds took to the streets soon after a fiery speech by Mari Alkatiri, who resigned from the prime minister's post this week under intense public pressure, triggering hopes of an end to the unrest and political paralysis.
Blaming the enemy
Alkatiri told about 2,000 supporters in a nearby city to converge peacefully on the capital, Dili, in coming days and accused his detractors of being behind the recent violence.
"They destroyed Dili town, burned, looted and killed our people, and then they accuse me of being a terrorist, communist and a killer," Alkatiri said in his first public comments since stepping down.
Gusmao announced plans to form
a caretaker government
Sirens blared overnight as Portuguese police raced to the area to control the series of arson attacks, mostly of vacant homes whose residents have fled to refugee camps.
Helicopters patrolled the skies all night.
Many East Timorese say Alkatiri's dismissal of 600 disgruntled soldiers in March was to blame for street battles and gang warfare that left at least 30 people dead in the worst violence to hit the tiny nation since its vote for independence from Indonesia seven years ago.
Homes were torched and machete-wielding youths went door to door to carry out personal vendettas. Almost 150,000 people fled their homes before a 2,700-strong foreign peacekeeping mission arrived to restore order.
The dismissed soldiers were mostly from the western part of the country, and they complained of discrimination and poor conditions compared to their eastern counterparts.
Some witnesses of the arson attacks said that the perpetrators were western Timorese and that some of the youths drove past refugee camps housing easterners and shouted: "Get out of Dili!"
Alkatiri's resignation on Monday had been seen as key to easing months of political tensions.
Street battles and gang warfare
has been seen in East Timor
The president, Xanana Gusmao, announced plans to form a caretaker government but did not say who would replace Alkatiri. Many believe that Jose Ramos-Horta, the country's Nobel prize-winning foreign minister, will be nominated for the office.
Gusmao also said emergency powers would be extended to security forces for one month to prevent large gatherings, search suspicious persons and confiscate weapons.
Alkatiri has been summoned for questioning by the prosecutor-general this week on allegations that he hired hit squads to silence his political opponents.
He denies the accusations, but one of his close allies, former interior minister Rogerio Lobato, is facing charges of arming militias at the request of the outgoing premier.