Armed police escorted hundreds of local authority workers wielding bamboo sticks, rakes and saws as they descended on the shantytown in Hlegu township -- the first major forced eviction under the civilian government of Aung San Suu Kyi.
Furious occupants screamed at the workers as they started pulling down bamboo houses early in the morning.
"You idiots... You are all evil. How dare you do this?" cried one woman.
"The government is useless and we were wrong to use our fingers to vote," one man shouted. "The government is always afraid of the army. How can we rely on the government?"
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An AFP journalist saw five men and one woman being hauled into police vans for trying to stop the clearance.
Local reports said the slum, around 45 kilometres (28 miles) northeast of Yangon near the highway to Mandalay, was home to 4,000 houses.
Soaring rents and rapid urbanisation have forced thousands of people into Yangon's shantytowns, which are thought to house some 10-15 percent of the city's population.
Competition for land has intensified since 2011, when the junta ceded power to a quasi-civilian administration that threw open the doors to international investors.
The government which took power last year has vowed to tackle the issue and in May 2016 announced plans to evict Yangon's hundreds of thousands of squatters.
"This land is owned by the government," Myat Marlar Htun, local MP from Hlegu township, told AFP on Monday.
"Most of the slum people here now arrived within a year, some in a few months."
Monday's clearance is the second time in a year and a half that squatters have been kicked out of Hlegu.
Worker rights activist Ma Myo said many of the people who returned were unscrupulous dealers who had tried to grab the land for profit.
Squatters have no legal rights in Myanmar. International standards are supposed to guarantee compensation in the case of eviction but they are not enforced.
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