The police in bulletproof vests, some on horseback, fired at a crowd of workers armed with spears, clubs and machetes, with some gunfire also heard from the workers' camp.
The miners at the Lonmin platinum mine in Marikana have been demanding a three-fold salary hike, refusing an order by their union to return to work so that employers could enter into negotiations.
Police said they fired after several unsuccessful attempts to disperse protesters with water cannons, tear gas and stun grenades. Senior police officials showed photographs to prove that the police acted in self-defence.
The incident was roundly condemned by all sectors of society, including all political parties and religious leaders.
The bloodshed prompted President Jacob Zuma to cut short a trip to neighboring Mozambique for a summit of regional leaders. He is set to visit the troubled North West province where the mine is located.
Zuma said he had instructed law enforcement agencies to do everything possible to bring the situation under control and to bring the perpetrators of the violence to book.
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As an uneasy calm descended on the area with loved ones made their way to morgues to identify the dead.
The Azanian People's Organisation likened the violence in Marikana to the Sharpeville and Soweto shootings of the apartheid era, when police, acting on the instructions of the white minority government, opened fire on innocent protesters, killing scores of people including young schoolchildren.
Besides the wage demand, the violence at the mine is also believed to be the result of rivalry between members of the National Union of Mineworkers and the Association of Mineworkers and Construction Union over recognition agreements at the mine.
In a statement, Lonmin chairman Roger Phillimore said: "We are treating the developments around police operations... with the utmost seriousness.
It was one of the worst police shootings in South Africa since the end of the apartheid era, and came as a rift deepens between the country's governing African National Congress and an impoverished electorate confronting massive unemployment and growing poverty and inequality.