The government plans to seek parliamentary approval before handing over the forest land to the Indian-founded Mehta Group for sugar cane farming.
 
Military police beat and dispersed the demonstrators, who had also attacked motorists of Indian origin and burnt a truck that was carrying sugar.
 
"All Indians should go back to Bombay. Mr President, let Mabira stay," read some of the placards brandished by the crowd.
 
Temple Attacked
 
As scores of demonstrators hurled rocks at police in pouring rain, officers rescued more than 100 Asian men besieged in a Hindu temple and elsewhere.
 
Fifty-year-old Dipaul Patel said: "We were inside the temple and the protesters started attacking us from outside.
 
"It was very frightening."
 
One witness, Senusu Mugodansonga, said a mob killed an Asian man after he crashed a motorbike into them.
 
Frank Muramuzi, the organiser of the demonstration, said the march began peacefully, before a "misunderstanding" with the police.
 
"All of a sudden they opened fire with tear gas and live ammunition," Muramuzi said.
 
Expulsion
 
Idi Amin, Uganda's former military ruler, expelled Uganda's Asians in 1972.
 
Thousands have returned, but they are viewed with suspicion by some Ugandans who resent their domination of many businesses.
 
Police commanders had approved Thursday's march, called to protest against plans to cut down thousands of hectares of Mabira forest to expand the estate of a local sugar company, Scoul.
 
Scoul is part of the Mehta Group.
 
Environmental impact
 
The controversy began last year when Yoweri Museveni, the president, ordered a study into whether to use part of the forest to grow sugar cane.
 
Mabira - which has been a nature reserve since 1932 - is one of Uganda's last remaining patches of natural forest.
 
The government's proposal has angered many Ugandans, with some saying the environmental costs of slashing the forest would far exceed the economic benefits of the plantation.
 
Environmentalists say destroying Mabira could have grave ecological consequences, from increased soil erosion to the drying up of rivers and rainfall, and the removal of a buffer against polluting nearby Lake Victoria.
 
They say it would also threaten monkeys and nine species found only in Mabira and surrounding forests.
 
In a newspaper advertisement published on Thursday, Scoul said "anti-development lobby groups" were misleading Uganda's public about the company's plans for Mabira.
 
"Scoul is very conscious of the environment and would not like to disturb the ecology," it said.