Three people, including a foreign journalist, were reportedly killed Wednesday when Thai armoured vehicles smashed through the barricaded Red Shirt compound in a crackdown against anti-government protesters.

Gunfire could be heard as the army launched an assault on the makeshift barrier of tires and bamboo sticks, firing shots and tear gas at the protesters. Troops armed with assault rifles retook the area around Lumpini Park, which has been under the control of protesters for weeks.

An Associated Press reporter, who followed troops as they accompanied the armoured vehicles, said he saw the bodies of two people in the protest zone in central Bangkok.

There were also reports that three foreign journalists had been shot. One, an Italian photographer, was shot in the chest and showed no signs of life, according to an AP photographer. He said a Dutch journalist had been shot in the shoulder and an American, 53, documentary filmmaker had been shot in the leg.

Thai government spokesman Panitan Wattanayagorn said its first stage security operation to secure the protest zone around Bangkok has been successful and that the army had gained control of the Lumpini Park area south of the protest site.

He also said some protest leaders had fled, though two of the three key leaders remained in the protest zone.

Panitan said the operation is designed "to secure the perimeter in several locations in Bangkok" and will last throughout the day.

Earlier, soldiers used loudspeakers to urge people to return to their homes. Smoke billowed above the city skyline as a government building was on fire in another part of Bangkok.

On Tuesday, the Thai government rejected a proposal for peace talks with leaders of the Red Shirt demonstrators, saying negotiations can't begin until protesters clear out of the streets.

Satit Wonghnongtaey, a Thai cabinet minister, said the prime minister has said talks will not begin until protests stop.

The Red Shirt protesters have occupied a three-square-kilometre area of downtown Bangkok for weeks, surrounding their camp with a makeshift barrier made of tires and bamboo sticks.

The protesters, many of whom hail from the impoverished north and northeast, believe the current government is illegitimate and have been pushing the prime minister to dissolve parliament and call new elections.

Military defends use of force

Police and protesters have clashed on several occasions since the Red Shirts descended on the capital in mid-March, but the violence erupted again last Thursday, the same day that a rogue Thai army general was shot in the head while talking to reporters.

Maj.-Gen. Khattiya Sawasdiphol died from his injuries Monday, raising fears that his death could spark more violence.

A soldier watches from his bunker as a gasoline bomb is thrown by anti-government protesters near a barricade in Bangkok on Tuesday. (Fayaz Kabli/Reuters)

At least 39 people have died and more than three hundred have been injured in less than a week, as the conflict between protesters and security forces spilled into the streets around the protest site.

Amnesty International blasted the government's use of force in a statement released Tuesday, saying eyewitness accounts "show clearly that the military is firing live rounds at unarmed people who pose no threat whatsoever to the soldiers or to others."

The military has defended its use of force, saying troops only fired to protect themselves and Bangkok's citizens and did not pursue pre-emptive attacks.

Previous attempts to negotiate an end to the standoff — which has destabilized a country once regarded as one of Southeast Asia's most stable democracies — have failed. A government offer earlier this month to hold November elections foundered after protest leaders made more demands.

With files from The Associated Press