One East Timorese police officer was killed by mobs during a protest in support of nearly 600 dismissed soldiers in the capital Dili, police said.

The commander of East Timor's police rapid reaction unit, Soares Hale, told reporters that a police sub-inspector had "died because he was beaten in the neck". "The situation is serious but we have things under control," he added.

Earlier, witnesses were reported as saying that two bodies had been lying down at the Intensive Care Unit of Dili's National Hospital, where four policemen and 17 civilians were also admitted to for various injuries, some in serious condition.

Police earlier fired tear gas to disperse the rally of several thousand protesters after some of them smashed windows outside Prime Minister Mari Alkatiri's office building, a correspondent witnessed. He said there were about 100 police seeking to control the crowd before the tear gas dispersed them.

The rally was the third held by the disgruntled soldiers this week. They were dismissed after they had deserted the tiny country's armed forces.

The protesters, many armed with wooden planks and steel pipes, also set fire to five cars before police dispersed them. At least five protesters were injured in the melee, the correspondent reported.

The soldiers' leader, Gastao Salsinha, has said the troops, mainly from East Timor's 10 western districts, deserted because they were being passed over for promotion in favour of those from eastern districts.

East Timor's Foreign Minister Jose Ramos-Horta said earlier this month the government was setting up a panel to review the soldiers' complaints. He said the men may be reinstated but only on a case-by-case basis.

East Timor became the world's youngest nation in May 2002, after a UN-backed referendum that handed the former Portuguese colony independence from Indonesia, which had occupied it for 24 years.