Violence erupted as the riot police tried to take back the protest site at Phan Fah Bridge hours after arresting 100 protesters in front of state-owned oil and gas company PTT Plc for violating a state of emergency declared in January.
Gunfire and explosions broke out after police began the operation called the "Peace for Bangkok Mission".
"Two civilians and a policeman were killed and 59 others were injured in the clash between police and protesters," city's Erawan emergency medical centre said.
He said the officers were injured by grenades and bullets even though they were using peaceful measures to reclaim the site.
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A foreign journalist was also among the injured.
The Centre for Maintaining Peace and Order (CPMO) said it plans to retake Government House, Prime Minister's office, as the first target of its operation to reclaim five areas occupied by the People's Democratic Reform Committee (PDRC).
Labour Minister Chalerm Yoobamrung, the CMPO director, said Prime Minister Yingluck had instructed him not to resort to violence.
They want the government to hand over power to an unelected people's council to implement reforms they say are needed to end corruption.
Meanwhile, Thailand's anti-graft panel today that it was pressing charges against Shinawatra for neglect of duty in connection with a controversial rice subsidy scheme.