Louise Williams, Jakarta – Indonesian intelligence officers opened fire on East Timorese demonstrators during a visit by three European Union ambassadors to the coastal town of Baucau yesterday, as anti-Indonesian street rallies escalated across the contested territory.

Two plain-clothed officers, one armed with a pistol, the other with an automatic weapon, opened fire as a crowd waiting for the European diplomats beat on the windows of the officers' car and began throwing stones. One man was killed and five were injured, Agence France Presse reported. The security men were in a convoy of cars behind a vehicle carrying the diplomats from Britain, Austria and The Netherlands – the latter representing Luxembourg – who are assessing conditions in the former Portuguese colony.

Hundreds had spilled onto the streets to welcome the convoy but were angered when they realised Indonesian intelligence officers were in one of the cars, and began to attacking it. The envoys had already entered the office of the Catholic Bishop of Baucau, Monsignor Basilio Do Nascimento, for talks.

In the provincial capital, Dili, witnesses said the city was virtually paralysed as a five-kilometre protest march wound through the streets, the biggest of a series of anti-Indonesian rallies timed to coincide with the EU visit. A resident contacted by telephone said: "The town is practically closed. Nearly everyone is on the streets." Several trucks of soldiers were on standby, but no violence was reported.

Tens of thousands had turned out to march yesterday, the resident said, the fourth consecutive day of rallies in the capital despite a warning by the Jakarta-appointed Governor, Mr Abilio Soares, that security forces would get tough on protesters. "We will ask those holding [peaceful] demonstrations to stop. Let us have a dialogue," he said. "If they refuse they will be arrested. But, I will ask the armed forces not to kill them."

In Jakarta, Indonesia's Foreign Minister, Mr Ali Alatas, reaffirmed his Government's rejection of calls for independence, but said Jakarta was willing to negotiate on the conditions of autonomy within Indonesia.

He warned that one of the protesters' key demands, holding a referendum on East Timor's status, would only cause more violence. "A referendum will only cause a split among the East Timorese and a civil war." Over the weekend, rival groups clashed in the town of Manatuto, east of Dili, and one man was killed and two seriously injured when troops opened fire. Mobs also stoned Mr Soares's office.