Dozens of people were arrested.
After several hours of cat-and-mouse fighting, the governor of Dakar, Amadou Sy, said four new markets would be created for the traders to relocate to.
One supermarket worker said: "People are fed up. These are youths who sell things in the street who voted the president in and now he wants to chase them away."
Living costs and unemployment are rising in the West African country. Thousands risk their lives annually trying to cross to Europe in the hope of bettering their living conditions and to provide for their families.
|The hawkers fought for several hours [AFP]|
However, high-rise buildings, five-star hotels and luxury bungalows are being built for the summit, along with new roads.
Some business owners have complained about working hours being lost due to street congestion caused by the vendors' illegal wooden stalls blocking the pavements.
Police also banned a march by union members against living costs on Wednesday and blocked the main Boulevard du General de Gaulle beating protesters with rubber truncheons. About 600 people defied the ban.
The city's electric company, Senelec, caught fire in the unrest and government offices were attacked.
One bystander said: "This is a popular uprising in support of the street sellers. The population is behind them. We've had enough."