"It's a full-fledged riot," said a reporter from New Zealand's National Radio.
Protesters also broke into a supermarket owned by prime minister Sevele and managed by his daughter. Other shops and businesses have also been damaged.
Police helped people to escape the neighbourhood and tried to protect property but are not reported to have arrested any protesters.
Winston Peters, New Zealand's foreign minister, has offered his country's assistance.
Tonga, a group of islands about 2,000km off the coast of New Zealand, saw protests in May 2005, when 10,000 people took to the streets demanding democracy and public ownership of key assets.
George Tupou V, the Tongan king, promised changes to the country's political system in September, including the election of government officials.
Last month, a government committee recommended that all lawmakers in Tonga be elected.
Currently, only nine lawmakers in the 32-seat parliament are elected by popular vote, while the rest are appointed by the king and noble families.
Sevele, alongside most of the country's political establishment, is seen by the protesters as complicit in the delay to the constitutional changes.