The confrontation took place Friday in the town of Touggourt, where people were protesting delays "in awarding plots, construction and connection to the water supply," APS news agency aid.
The pair killed were aged 20 and 24, Nahar newspaper reported, with witnesses adding that police were among the wounded.
The protests began with people blocking the road that leads to the nearby Hassi Messaoud oil field, the daily said.
After police dispersed them with tear gas and batons, they converged on the police station, where the fatal clash took place.