Intense exchanges between police and criminals began early morning inside the Rocinha favela, where approximately 70,000 people live in a teeming cluster of small houses on hillsides overlooking wealthy western Rio.
Amateur footage broadcast on Globo television showed men with a variety of rifles and pistols firing volley after volley in a densely built-up area.
A bus was set ablaze near a major road tunnel underneath the favela, and the main highway was temporarily shut down by police, causing traffic snarls on one of the city's main east-west arteries.
As the situation spun out of control, Defense Minister Raul Jungmann agreed to pleas from civilian authorities for help, ordering 950 troops onto the streets, as well as 10 armored personnel carriers.
The troops were assigned to securing perimeters, rather than going directly into the favela, where AFP journalists saw elite SWAT police in camouflage moving through the narrow streets.
"We will help to secure the region, control traffic and control airspace, with the goal of freeing up police units to do more specifically police work," General Mauro Sinott told journalists.
Violence is common in favelas -- home to almost a quarter of Rio's population -- with drug gangs controlling much of the territory and police forced to remain on permanent alert.
However, the situation spun dramatically out of control in Rocinha on Sunday when members of a narco gang poured into the favela to try and push out rivals.
Antonio Ricardo Lima Nunes, the local police chief, told AFP "it's a war between two bandits."
Footage taken by residents Sunday of groups of men with rifles moving unimpeded through the streets in quasi-military fashion shocked Rio residents.
That dismay deepened when it was revealed that police had hidden themselves in their station and Rio state Governor Luiz Fernando Pezao said he'd ordered the security forces not to intervene.
Pezao said Wednesday he did not want to risk a spillover of the violence as tens of thousands of people were using the highway below the favela to reach the Rock in Rio music festival. The festival was due to continue through the weekend.
The rising crime rate and increasing inability of the security forces to reestablish control is also linked to Rio state's near bankruptcy.
A steep fall in oil prices, national recession and runaway corruption have created a perfect economic storm in the state, contributing to a budget hole that leaves public employees, including police, sometimes waiting months for salaries.
On Wednesday, former governor Sergio Cabral was sentenced to 45 years in prison for money laundering and leading a criminal organization. Cabral was in office during much of the runup to the 2014 World Cup in Brazil and Rio's hosting of the 2016 Olympics.
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