Eyewitnesses reported seeing army units shooting above the protesters and then at them, as they attempted to drive them back from security cordons near Pearl Square.

Around 35 people are injured, according to Sky sources.

It comes after thousands of people attended the funerals of four people killed in recent unrest, chanting slogans and calling for change.

There had been fears that the gatherings would spark further violent clashes.

Formula 1 boss Bernie Ecclestone will wait for developments in Bahrain before deciding whether the season-opening Bahrain Grand Prix can go ahead.

Concerns about the race on 13 March follow unrest which has seen three people killed and 231 injured.

Ecclestone initially told BBC Sport on Friday that he had been told there were "no problems" in Bahrain.

But he later admitted the situation had deteriorated, adding: "We should wait and see what happens over the weekend."

Ecclestone added that a decision could be made next Tuesday or Wednesday.

There are also reports that the team managers have been in a 2 hour meeting discussing wether the final testing session, due to happen in bahrain might instead be shifted to Barcelona. The Barcelona track is available on the requested dates.

Any idiot can face a crisis - it's day to day living that wears you out.

BREAKING: Twitter is blowing up right now with reports that Bahrain authorities are firing into a crowd of thousands that is assembled for the funeral of those killed in yesterday's crackdown.

This could be a massacre underway.

UPDATE:  This is really happening, folks.  From Twitter user Muiz: "Hospitals not reporting wounds to body or arms, almost all are to the chest & head - live ammo from the ground & air"

From Al Jazeera English's Evan C Hill: "Our correspondent in #Bahrain reports live ammo, not birdshot, not rubber bullets, being used on protesters. #feb17″

From AP reporter Hadeel al-Shalchi:

"Protesters were carrying flowers saying they wanted to deliver it to police. Were shot instead. Blood on street now #bahrain"

"Protesters reached the #lulu square, sat down and army shot into them again #bahrain"

Thousands at SMC. Crown prince wt authority for progress.

15 hours after arriving in #Bahrain, BBC journalist is finally allowed to leave airport, but even her mobile phone has been confiscated.

WikiLeaks to release over 100 new Bahrain revelations tonight.

(C) King Hamad understands that Bahrain cannot prosper if he rules by repression.

As news of Bahrain's turmoil continues to develop, many wonder where the country's crisis is headed. Violence is now being used against peaceful protesters as protests enter their fifth day, and Bahrain's ruling family orders its army to turn on demonstrators. POMEPS and Foreign Policy's Middle East Channel have produced a wide range of high quality analysis over the past year on Bahrain. As part of POMEPS' recently launched Briefing series, a PDF is now available which highlights some of the Middle East Channel's best work on this small country which has recently rocked the Gulf.

Armoured vehicles sealing off Pearl Square, the focal point of protests in Bahrain's capital, have withdrawn on the orders of the royal family.

Police have returned to fire tear gas at protesters trying to enter the area.

Earlier, the main Shia opposition bloc, Wefaq, rejected an offer from the king to hold talks aimed at ending days of unrest in the Sunni-ruled Gulf state.

The army's withdrawal and the resignation of the government were a condition for talks, the bloc said.

But a Wefaq MP has now told the BBC that the army's withdrawal was positive, and that the government's resignation was not a pre-condition for talks.

Thousands of Bahraini protesters flooded back into Pearl Square in the capital of Manama on Saturday afternoon after the army appeared to withdraw from the area following two days of violent clashes that killed several people and injured dozens more.

Angry crowds headed toward the square chanted "Down, down Hamed!" referring to the king, and "Bring down the government!" according to the Los Angeles Times.

CNN's Nic Robertson described "scenes of jubilation" in Pearl Square, despite reports of initial attempts by police to disperse the protesters with tear gas.

Emotional scenes: Protester who has become clinically dead by rubber bullet is taken out of ICU in hospital http://youtu.be/oH_hDtG7aK4