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"Five deaths have been registered among the outlaws" in Diraz, near the capital of Manama, where the police opened fire to disperse the sit-in outside the home of cleric Isa Qassim, the ministry said in a Twitter message.
Witnesses had earlier told AFP that several civilians were wounded when police officers fired at demonstrators throwing stones and Molotov cocktails at security forces.
"A total of 286 arrests were made, including fugitives that had escaped from Jau Prison," the ministry said.
"Several terrorists and convicted felons were also apprehended with a large number of them hiding in the residence of Isa Qassim," it added.
Qassim is considered the spiritual leader of Bahrain's majority community.
A US State Department official said Washington was "concerned" by the reports of protesters killed and was following events in Bahrain very closely.
"We urge restraint on all sides in responding to today's developments and call on all parties to contribute to a climate conducive for dialogue and reconciliation," the official told AFP.
The Kingdom has been rocked by unrest since 2011, when local authorities backed by a Saudi military force crushed protests demanding a constitutional monarchy and an elected prime minister.
Earlier on Tuesday, The Britain-based Bahrain Institute for Rights and Democracy (BIRD) had announced one death as the police moved to disperse the long-running protest.
Bahrain police arrested 50 "fugitives," including prison escapees "convicted over terrorism" charges, the Nahrain interior ministry said earlier.
Several members of the security forces were injured, it added.
The Bahrain authorities have accused Qassim, sentenced on Sunday to a suspended one-year jail term for illegal fundraising and money laundering, of serving "foreign interests" and promoting "sectarianism and violence."
A court last year stripped him of his citizenship, sparking repeated sit-ins outside his residence in Diraz.
Pictures posted on Twitter by opposition groups showed demonstrations that purportedly broke out in nearby villages protesting the crackdown in Diraz.
A court last year ordered the dissolution of the Kingdom's main opposition group Al Wefaq after authorities accused it of "harbouring terrorism."
An 18-year-old Bahraini died in March, nearly two months after he was shot in the head fleeing a raid on Qassim's house, Amnesty said.
Rights activists fear Qassim could be among the first to face court-martial.
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