Thai troops fired rubber bullets and teargas at thousands of demonstrators, who fought back with guns, grenades and petrol bombs in riots that killed at least 15 people in Bangkok's worst political violence in 18 years. At least 521 people, including 64 soldiers and police, were wounded in the fighting near the Phan Fah bridge and Rajdumnoen Road in Bangkok's old quarter, a protest base near government buildings, and the regional UN headquarters.

Bangkok, Thailand: Supporters of fugitive former Thai premier Thaksin Shinawatra scuffle with Thai riot police during continued anti-government protests Photograph: Roslan Rahman/AFP After hours of violence, army spokesman Sansern Kaewkamnerd said troops would pull back in the old quarter as the riot spread into Khao San Road, an area popular with back-packing tourists. "If this continues, if the army responds to the red shirts, violence will expand," Sansern said. He urged the protesters to do the same as they pelted soldiers with petrol bombs and M79 grenades. He said some protesters were armed with guns.

A red shirt leader later called on supporters to pull back to the main protest sites. The protesters, meanwhile, were upping the stakes in their public statements against the prime minister, Abhisit Vejjajiva. "We are changing our demand from dissolving parliament in 15 days to dissolving parliament immediately," one leader, Veera Musikapong, told demonstrators. "And we call for Abhisit to leave the country immediately."

Hundreds of red shirts forced their way into government offices in two northern cities. The protesters said they would besiege governors' offices in the provinces if there was a crackdown in the capital.

The protesters, mostly coming from Thailand's rural poor in the north and north-east of the country, oppose the current government, arguing that it is illegitimate and in effect a puppet regime for the wealthy Bangkok elite which has long controlled Thai politics. Many are supporters of the exiled former prime minister Thaksin Shinawatra, but their movement has also been gaining increasing support among Bangkok's middle class.

A state of emergency was declared in Bangkok on Wednesday, after red shirts broke into the grounds of parliament, forcing the deputy prime minister to flee by helicopter.

The worst clashes appeared to have occurred from around 3pm near Phan Fah Bridge in the city's old area as the army tried to "reclaim" the area. While the stand-off was initially peaceful, as soldiers advanced towards a line of protesters who stood with arms interlocked, the confrontation became heated, witnesses told the Observer. As warning shots were fired, protesters rushed at troops. The army initially claimed it used only teargas and rubber bullets, later saying live rounds were fired but only into the air.

After nearly a month of protests, the government has proved unable to counter the growing confidence of the red shirts. Initially praised for his cool, Vejjajiva, holed up in an army barracks, is now being criticised as ineffective. There are doubts he has the army's full support, with many soldiers, in particular those from the north-east, said to favour the protesters.