Federal forces and heavily armed vigilantes are warily watching each other in a violence-wracked farming area of western Mexico after one deadly clash and a failure by leaders from both sides to work out a deal on disarming.

Officials from the federal and Michoacan state governments met until late Tuesday with leaders of so-called self-defence groups that have increasingly been confronting a drug cartel, but it adjourned with no agreements.

Still, while refusing to give up their weapons, vigilante leaders appeared to be seeking a cooling of tensions.

'Last week they were protecting the vigilantes ... Now they're going to put them down with firepower and bloodshed?' - Alejandro Hope, security analyst

"We have to be discreet with our weapons and not move up and down the highways with them," Hipolito Mora, a lime grower who leads the self-defence group in the town of La Ruana, said after the meeting.

Interior Secretary Miguel Angel Osorio Chong confirmed the talks had taken place, and said the government was offering jobs as police to qualified members of the self-defence forces.

The spokesman for the vigilante movement, Estanislao Beltran, previously said the vigilantes weren't interested in such offers. "We don't want jobs as policemen. We're fighting for the freedom of our families," he said.

The talks came after soldiers clashed with townspeople in Antunez, where at least two men were reportedly killed during the confrontation that began late Monday. Video of the clash aired by Milenio Television showed a chaotic scene in which angry townspeople scuffled with soldiers and apparently tried to grab the gun and equipment of at least one soldier.

Extra security sent to region

The unrest is in a region of Michoacan known as Tierra Caliente, a rich farming area that is a major producer of limes, avocados and mangos where vigilante groups have been trying to drive out the Knights Templar drug cartel. After a weekend of firefights, the government announced Monday that it would take on security duties in the area.

Throughout Tuesday, federal police officers and soldiers set up roadside checkpoints just yards from roadblocks manned by vigilantes on routes into towns controlled by self-defence groups, but there were no attempts to take weapons from the civilians.

Mexico Vigilantes

The Self-Defence Council of Michacan, (CAM) attempted to flush out alleged members of the Knights Templar drug cartel from the town of Nueva Italia, Mexico on Sunday. (Eduardo Verdugo/The Associated Press)

One federal officer who was not authorized to speak to the press said they had no orders to disarm anyone, or to try to take towns held by vigilantes.

Hundreds of federal police officers poured into Apatzingan, the region's main city, travelling in pickup trucks with machines guns mounted on the top, armoured vehicles and buses. They massed in the city square as residents watched.

The Rev. Gregorio Lopez, a parish priest in Apatzingan's Roman Catholic diocese, watched the display of force, but brushed it off as "just a show."

"Police sent in from outside don't know where the criminals are," Lopez said. "We know of 10 warehouses where they are hiding armed men; they (federal police) aren't going to find them."

Government response a 'disaster'

Vigilantes have surrounded Apatzingan, which is said to be a Knights Templar stronghold. Rumours circulate that some self-defence groups have been infiltrated by the rival New Generation cartel, which the vigilantes vehemently deny.

Security analyst Alejandro Hope, who formerly worked for Mexico's intelligence agency, called the government's strategy in Michoacan a "disaster."

After initially arresting vigilantes months ago, the federal government under Interior Minister Miguel Angel Osorio Chong appeared to be working with them recently. The army and federal police have provided helicopter cover and road patrols while self-defence groups attacked the cartel, but never intervened in the battles.

"Last week they were protecting the vigilantes," said Hope, director of security policy at the Mexican Competitiveness Institute. "Secretary Osorio practically said they were useful ...  Now they're going to put them down with firepower and bloodshed?"

Self-defence group leaders said they were co-ordinating the highway blockades in the 17 municipalities they control to keep out soldiers and federal police.

Felipe Diaz, a leader of vigilantes in Coalcoman, said close to a 1,000 men, women and children helped block the main highway until soldiers and dozens of federal police in four buses and 15 pickup trucks left the area.

"We're still providing security to our people," Diaz said. "We're talking to them, telling them everything is OK, everything is calm."